• Aligning electricity energy policies in Alaska: analysis of the power cost equalization and renewable energy fund programs

      Villalobos Meléndez, Alejandra; Little, Joseph; Huskey, Lee; Baek, Jungho (2012-05)
      Most rural Alaska communities are not road connected and must cope with challenging arctic environmental conditions. Due to their remoteness and sparse populations, these villages depend on isolated non-grid connected electric generation systems that operate on fuel oil. In Alaska, the Power Cost Equalization program is a 25 year long energy subsidy that targets rural residents to provide energy costs relief. A more recent state incentive program, the Renewable Energy Fund, was developed to expand the use of renewable resources and lower the cost of energy. Some rural communities have benefited from this program and have integrated renewable energy to their systems, particularly installing Wind-Diesel systems. Both programs have congruent goals of alleviating dependence on high cost fossil fuels to generate electricity as means to foster development and higher quality of life in rural Alaska communities. However, their incentive structure may conflict. This paper provides a review of these two energy subsidy policies with a particular focus on the Power Cost Equalization program and offers potential changes to its structure such that social cost impacts to rural residents are minimized while removing incentive barriers against energy efficiency and integration of renewable energy in rural Alaska communities.
    • Changes in the value of the Southeast Alaska salmon purse seine limited entry permits following two permit buy back programs

      Shriver, Jennifer Christine (2014-12)
      The Southeast Alaska salmon purse seine fishery (S01A) is an Alaska state waters limited entry fishery. When initially limited by the Commercial Fisheries Entry Commission in 1975, 419 permanent permits were issued. As salmon prices dropped in the late 1990s, current and expected future revenues also dropped leading to a decline in the market value of permit. This led permitees to look at different ways to improve their economic position. Reduction of permit numbers through the buyback and permanent retirement of some permits emerged as a preferred option for the S01A fishery; it was motivated as the best means to improve economic conditions in the fishery. After a very long road of regulatory changes at the state and federal level, 35 permits were bought and retired in 2008 using funds provided under a federal grant. A second buyback in 2012, based on a federally backed fishery reduction loan led to the retirement of 65 additional permits. Basic economic principles suggest that resulting decrease in supply of limited entry permits would lead to an increase in the market value of remaining permits. An important policy question is: whether the increased value to permitees is sufficient to offset the cost to taxpayers of financing the buyback. However, conducting that cost-benefit assessment is made difficult because of unrelated but concomitant changes in exvessel prices and catch volumes. During the same time that permits were being removed through the buyback, the exvessel value of salmon increased as did the volume of Southeast Alaska salmon harvests, per-vessel average exvessel gross earnings, and the market value of S01A permits. Econometric analyses based on Alaska Commercial Fisheries Entry Commission (CFEC) time series data on S01A permit values, estimated gross earnings, and salmon prices indicate that the buybacks led to statistically significant increases in the asset value of S01A LEPs. In light of the program's stated goals, the buyback was a qualified success in increasing the asset value of S01A permits and removing latent fishing capacity from returning to the fishery as exvessel prices increased. The buyback did not change the fundamental conditions that precondition the Alaska salmon LEP program to systematic vulnerabilities inherent in a management system that does not counter the pernicious race for fish motivations of participants.
    • A comprehensive bycatch market: investigating pricing mechanisms for ecosystem accountability

      O'Brien, Erik; Little, Joseph; Greenberg, Joshua; Goering, Greg (2015-05)
      This report takes an ecosystem approach to managing targeted and non-targeted species in the Bering Sea Aleutian Island commercial fisheries. The current regulatory environment sets biological harvest limits across fish stock's entire range, although the individual components of managing fisheries within a stock may lead to economic inefficiencies and difficulties in accounting for social costs due to blunt incentives. The research presented here outlines a model for scenario analysis and pricing mechanisms at each level of harvest across a species range. Due to the modeled indifference of harvesting in targeted or non-targeted fisheries, designations are made for degrees of ownership rights and monetary transfers to balance these rights in the presence of non-target bycatch. This report argues that efficiency gains can be made by managing behavior through pricing incentives at the margin.
    • Dying intestate or with a will on toxic estate? an evaluation of petroleum fiscal systems and the economic and policy implications for decommissioning of onshore crude oil fields in Nigeria

      Afieroho, Erovie-Oghene Uyoyou-karo; Patil, Shirish L.; Dandekar, Abhijit; Reynolds, Douglas B.; Perkins, Robert (2018-05)
      Many giant fields in the world like the onshore fields in Nigeria which were initially discovered over half a century ago, have begun to see consistent decline in production and profit, and are gradually entering into the economic end of field life or decommissioning phase. Characteristically, in most regions with mature fields, the large multinational oil companies have begun to sell their oil fields to small indigenous companies who may not be financially robust enough to complete the decommissioning, when it occurs. Because of the pervasive societal impact of the oil industry, if an investor fails to properly decommissioning the infrastructure, a responsible government will have to pay for the proper decommissioning, else society will suffer the socioeconomic, political, health and environmental impact. Therefore, society needs to be effectively engaged in the development of a sustainable decommissioning policy framework, which is hindered if society is uninformed and lacks access to pertinent information. Currently, there is abysmal information in the public space on the cost of decommissioning liabilities of oil fields, especially in developing countries like Nigeria. The public also need simple interpretative ways to determine the vulnerability of a county or entity to decommissioning default risk and the imminence of a default risk. Furthermore, there is currently, no way to benchmark the level of maturity or level of preparedness for decommissioning phase such that countries and entities can identify their gaps to a sustainable decommissioning policy framework and define a roadmap to close the gaps. These are important challenges to vigorous public participation, which is an essential requirement for development and implementation of any sustainable public policy for a public issue like decommissioning of crude oil fields. This study adopted several research methods to develop and introduce a new cost estimating methodology that uses publicly declared cost of asset retirement obligations (ARO) to determine a plausible cost estimate range for decommissioning liabilities. It was demonstrated with Nigeria onshore crude oil fields, which it determined to have a rough order of magnitude cost estimate for decommissioning liabilities that could be as high as $3 billion. Secondly, it also introduced decommissioning coverage ratio (DCR) and decommissioning coverage ratio vector (DCRV) as new metrics to evaluate the vulnerability to and imminence of decommissioning default risk. In demonstrating these new metrics, this study determined that the imminence of and vulnerability to decommissioning default risk for the onshore crude oil fields in Nigeria, with respect to any of the available revenue streams, is high. Thirdly, it developed a graded scale maturity model for sustainable decommissioning of petroleum fields. The model described as Fairbanks maturity model for sustainable decommissioning in the petroleum industry, has five progressive levels of maturity. It leveraged the methodology used for similar maturity models developed in other industries and for business management, and a comparative analysis of level of progress in decommissioning frameworks between some countries with leading decommissioning experience in the petroleum industry, to develop the Fairbanks maturity model. Based on the Fairbanks maturity model, frameworks for sustainable decommissioning of Nigeria onshore crude oil fields were evaluated to be at Level 1, Ad hoc maturity level, which is the lowest maturity level. Recommendations to close the identified gaps were also were made. These methodologies can be applied to any petroleum producing region or entity in the world and are advancements to the frontier of knowledge in the management of decommissioning phase for petroleum fields in general and Nigeria onshore fields in particular.
    • Economic assessment of Alaska North Slope hydrate-bearing reservoir regional production development schemes

      Nollner, Stephanie P.; Dandekar, Abhijit; Patil, Shirish; Ning, Samson; Khataniar, Santanu (2015)
      The objective of this project was to evaluate the economic feasibility of producing the upper C sand of the Prudhoe Bay Unit L Pad gas-hydrate-bearing reservoir. The analysis is based on numerical modelling of production through depressurization completed in CM G STARS by a fellow UAF graduate student, Jennifer Blake, (2015). A staged field development plan was proposed, and the associated capital and operating costs were estimated using Siemens's Oil and Gas Manager planning software and costing database. An economic assessment was completed, incorporating the most common royalties, the current taxes laws applicable to conventional gas development, and most recent tariff estimates. The degree of vertical heterogeneity, initial average hydrate saturation, well spacing and well type had a significant impact on the regional gas production profiles in terms of cumulative volume produced, and more importantly, the expediency of gas production. The volume that is economically recoverable is highly dependent on how the field is developed. A field that has higher vertical heterogeneity and corresponding lower average initial hydrate saturation is most economically produced using horizontal wells at 160 acre spacing; the acceleration of gas production outweighs the increased drilling costs associated with the longer wells and tighter well spacing. The choice of development scenario does not impact the project economics significantly given a field that has lower vertical heterogeneity; however, development using horizontal wells at 320 acre spacing is marginally more economic than the alternatives. Assuming a Minimum Attractive Rate of Return of 20%, the minimum gas price that would allow economic production of ANS gas hydrates was found to be $29.83 per million British thermal units; this value is contingent on the reservoir having high average initial hydrate saturation and being developed with horizontal wells at 320 acre spacing. A slightly higher gas price of $36.18 per million British thermal units would allow economic production of a reservoir having low average initial hydrate saturation that is developed with horizontal wells at 160 acre spacing.
    • The future of shale

      Malin, Michael A.; Vander Naald, Brian P.; Little, John; Tichotsky, John; Reynolds, Douglas (2016-05)
      This project examines the various drivers that led to the U.S. shale oil revolution in order to predict its place in the energy industry going forward and to analyze its effects on Alaska. The shale boom flooded the market with oil causing a dramatic decrease in crude oil prices in late 2014. With this price drop threatening to send Alaska into an economic recession, the future of shale should be of primary concern to all Alaskans as well as other entities that rely heavily on oil revenue. The primary driver leading to the shale revolution is technology. Advances in hydraulic fracturing, horizontal drilling, and 3D seismic mapping made producing shale oil and gas possible for the first time. New technologies like rotary steerable systems and measurements while drilling continue to make shale production more efficient, and technology will likely continue to improve. Infrastructure helps to explain why the shale revolution was mostly an American phenomenon. Many countries with shale formations have political infrastructure too unstable to risk shale investment. Capital infrastructure is a primary strength of the U.S. and also helps to explain why shale development didn't find its way up to Alaska despite having political stability. Financial infrastructure allowed oil companies to receive the funding necessary to quickly bring shale to the market. The final driver explored is crude oil prices. High oil prices helped spark the shale revolution, but with the recent price crash, there is uncertainty about its future. With production costs continually falling due to technology improvements and analysts predicting crude oil prices to stabilize above most project breakeven points, the future of shale looks bright.
    • Impact of specific CSR activities, executive & board diversity on equity valuations

      Williams, David J.; Little, Joseph; Baek, Jungho; Greenberg, Joshua (2018-05)
      The objective of this study is to identify the impact of specific corporate social responsibility behaviors on equity prices. This study uses fixed effect parametric and nonparametric regressions to quantify the effect of specific corporate social responsibility activities on the equity price multiples of a number of US firms from 1999 to 2009. The results of these empirical models consistently show that CEO diversity, corporate charitable giving, and work-life balance benefit plans, are associated with lower equity price multiples compared against similar firms that lack these characteristics. Additionally, board diversity and support of the LBGTQ community is associated with a positive impact on equity price multiples. This study provides evidence that individual corporate social responsibility activities can have drastic impacts on equity prices, leading the way for future research testing whether the magnitudes of these impacts are rational and in-line with their expected impact on financial performance and risk, or a deviation from the efficient market hypothesis.
    • Market impacts and global implications of U.S. shale development and hydraulic fracturing: an economic, engineering, and environmental perspective

      Umweke, Maduabuchi Pascal; Baek, Jungho; Patil, Shirish; Perkins, Robert; Reynolds, Douglas (2018-05)
      The United States oil industry is experiencing a revolution because of significant oil production from tight oil plays since the mid-2000s. Advancements in horizontal well drilling and hydraulic fracturing are powering this new chapter in oil development. Increased oil production has brought billions of dollars of new revenue to oil companies involved in tight oil exploration and production, new jobs in the oil industry, and more tax revenue to oil regions around the U.S. However, tight oil resources do not only exist in the U.S. An understanding of the U.S. tight oil development experience could bring value to stakeholders within and outside the United States, and provide lessons and templates applicable in other tight oil regions. This research examines the U.S. tight oil experience and draws lessons for aspiring tight oil regions on the engineering, economic, and environmental fronts. On the economic front, I have examined an autoregressive distributed lag (ARDL) model on key oil industry macroeconomic data (West Texas Intermediate oil price, tight oil production, and rig count) from 2007 through 2016, and the impact of oil price on tight oil development for the Bakken, Eagle Ford, Niobrara, and Permian tight oil plays. The results show that oil companies in different plays react differently to oil price signals and do so in relation to oil field development characteristics. In addition, oil production and drilling intensity in the Eagle Ford play is found to be most responsive to oil price increases than the Permian, Bakken, or Niobrara oil plays. The Permian play was most resilient during the 2014 through 2016 oil price plunge. Oil production does not fall in response to a decrease in oil price, equally as it rises in response to oil price increase. Tight oil operators are quicker in bringing drilling rigs to service as prices rise than they take them away in response to falling oil prices, but do reduce drilling significantly in response to an oil price plunge. These results have significant ramifications for operators and assets in the respective oil plays or future plays with similar development characteristics. On the engineering front, I used petroleum engineering oil production forecasting Decline Curve Analysis techniques, the Drillinginfo Software, and historical development data of U.S. plays, to conduct oil production forecast for seven U.S. tight oil plays. Forecast results are shown to be comparable to forecasts by the Energy Information Administration (EIA). Building on previous EIA geologic studies on non-U.S. tight oil plays, and by selecting best analogues from within U.S. tight oil plays, I have completed an economic assessment and uncertainty analysis for 10 non-U.S. tight plays using a simple fiscal tax regime. The results indicate that the Eagle Ford play in Mexico, the Vaca Muerta play in Argentina, and the Qingshankou play in China rank highest among the plays studied. Of oil price, royalty rate, discount rate, well cost, extraction tax, and recovery factor parameters evaluated, results indicate that oil price and well cost are among the biggest drivers of profitability in these plays. On the environmental front, I conducted case studies on the busiest U.S. tight oil plays (Bakken and Eagle Ford) and examined the impact of tight oil development on the environment. Local solutions to environmental challenges alongside environmental regulations are discussed and presented as possible templates for other aspiring plays. Since securing freshwater sources alongside wastewater management emerge as major issues in tight oil development, a cost comparison is conducted for reused water disposal versus one-use water disposal options, for a hypothetical development. Results indicate that on a cost-per-well basis, the reduction in water disposal volume from subsurface frack flowback retention improves water reuse economics; the water reuse option is preferable to one-use water disposal for U.S. oil plays. This result points to potential cost savings for reused water disposal in regions such as the Bakken with few disposal wells.
    • On the willingness-to-pay for Elodea removal in the Fairbanks North Star Borough

      Kaczmarski, Jesse I.; Little, Joseph; Greenberg, Joshua; Fix, Peter (2018-05)
      The empirical research conducted herein addresses a public need for the funding of a project that would eradicate Elodea in the Fairbanks North Star Borough (FNSB). The eradication project has been outlined and approved by State and Federal agencies and has gathered funding to begin the eradication process. The study aims to develop a mean willingness-to-pay value for survey participants by shifting the funding burden to property tax payers. This body of work includes a primer on Elodea in the borough, an overview of contingent valuation, a parametric approach to willingness-to-pay, and results of the study conducted on Fairbanks property owners. The average willingness-to-pay per survey respondent is $50.32. In addition, 72% of survey respondents voted for the enactment of the program at their proposed cost level. These financial burdens took values of $10, $30, $60, or $120 per year for 4 years to fund the proposed program. A penalized maximum log-likelihood estimation found that the most significant predictors for the likelihood of a yes vote are the respondent's perceived risk to the ecosystem and recreational opportunities. Additionally, the respondents concern for the use of herbicides in the borough to treat the Elodea infestation is highly significant. The high level of prior knowledge throughout the survey indicates that respondents had established view on Elodea prior to the survey.
    • Up in smoke: exploring the relationship between forest firefighting and subsistence harvest

      Rodrigues, Alyssa V. S.; Little, Joseph; Greenberg, Joshua; Trainor, Sarah; Brinkman, Todd J. (2018-05)
      Wildland firefighting in Alaska is changing due to the impact of climate change on the boreal forest. Changes to the wildland firefighting regime could have significant impacts on community participation during fall subsistence hunting and, consequentially, food security levels. Many rural Alaska communities have mixed cash-subsistence economies in which people have to balance their time between earning an income and harvesting subsistence foods. Cash income is necessary to pay for things such as housing, electricity, gasoline, gun, ammunition, and other capital necessary to engage in subsistence. This dissertation aims to better understand the current relationship between Type 2, or hand crew, wildland firefighting and subsistence, primarily fall subsistence hunting, through several methods. Surveys and interviews were conducted with Type 2 wildland firefighters followed by policy recommendations. Econometric modeling of the wildfire attributes, community attributes, and firefighting wages and dispatches was conducted. Lastly, a food production simulation was conducted. Utilizing these various methods gives a well-rounded understanding of the relationship between firefighting and subsistence. Firefighting wages currently contribute to subsistence harvest productivity. As climate change lengthens the fire season, rural Type 2 fire crews will continue to participate in firefighting and fall subsistence hunting. Only under the most extreme estimates of future wildland fires does time spent fighting fire reduce time spent on subsistence fall hunting by much so that rural communities are unable to meet their subsistence needs.
    • Wind energy: is there an economy of scale in Alaska?

      Ellanna, Dayne; Lewellyn, Levi; Hulsey, J. Leroy; Perkins, Robert; Whitaker, Keith (2015)
      The purpose of this project is to show the cost relationship per kilowatt hour (kWh) between small scale (< 25kWh), medium scale (> 25 kWh and < 100 kWh), and large scale (> 100kWh) wind turbines. Our analysis will compare the cost per kWh and identify the economy of scale between our custom small scale models to commercial models. The commercial models used for this project were installed by Golden Valley Electric Association (GVEA) at their Healy, Alaska wind farm. We requested their wind data, capital investment breakdown, and their operations and maintenance costs. This data will be compared to the costs and wind data associated with our custom built wind turbine. Wind energy is dependent on one major variable, the wind. Regardless of the wind turbine size, wind speed, frequency, and duration will affect the efficiency of every wind turbine. Commercial wind farms are new to Alaska. The first major wind power project in Alaska was in 1997 in Kotzebue. This wind farm, of 17 wind turbines, represents the first megawatt of wind power in Alaska. Installation and maintenance of these systems is more expensive in Alaska due to the states' remoteness. Small scale systems used in this study are custom built because small scale commercial systems are not "hardy" enough to withstand Alaska's harsh weather systems. Both medium and large scale systems, for this study, are commercially constructed systems that have been designed to withstand these harsh conditions.