FORECASTING ENERGY SUPPLY AND POLLUTION FROM THE OFFSHORE OIL AND GAS INDUSTRY

Sound energy and environmental policies require reliable forecasts of production and pollution, as well as supply response to policy actions. In this study, we describe a model for forecasting long-term production and pollution in the offshore oil and gas industry in the Gulf of Mexico under different scenarios. A model based on disaggregated field-level data is used to forecast production and pollution through to the year 2050. The time path for resource depletion is determined as the net effect of technological progress and depletion under alternative scenarios for new discoveries. We also quantify potential efficiencies that could result from changing the design of regulations from the current command-and-control regime, to an approach that allows more flexible means of achieving the same environmental goals.Forecasting, energy supply, R&D, technological change, environmental regulations, environmental pollution, offshore oil, gas industry, Resource /Energy Economics and Policy, D24, L71, Q32, Q48,

Measuring Damages to Marine Natural Resources from Pollution Incidents under CERCLA: Applications of an Integrated Ocean Systems/Economic Model

Several pieces of federal environmental regulation establish strict liability for damages from spills of oil and hazardous substances. This paper discusses the Natural Resource Damage Assessment Model for Coastal and Marine Environments (NRDAMICME), which is to be used for assessing damages from spills of oil or hazardous substances in coastal and marine environments under CERCLA and the Clean Water Act, as amended. The approach employs an integrated ocean systems/economic model to simulate the physical fates and biological effects of a spill and to measure the resulting economic damages. To illustrate application of the model, selected results are presented for hypothetical spills of a number of substances in a variety of environments. The results show that the damage function depends on the physical and chemical properties of the substance spilled, the season, and the environment in which the spill occurs.Environmental Economics and Policy, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy, Risk and Uncertainty,

Stochastic frontier analysis of total factor productivity in the offshore oil and gas industry

Author Posting. © The Authors, 2005. This is the author's version of the work. It is posted here by permission of Elsevier B.V. for personal use, not for redistribution. The definitive version was published in Ecological Economics 60 (2006): 204-215, doi:10.1016/j.ecolecon.2005.11.028.We examine the impact of technological change on oil and gas exploration, development and production in the Gulf of Mexico over the past five decades. We analyze the effect of technological change on the production frontier using a unique field-level data set covering 1947 through 1998. We then develop estimates of the growth in total factor productivity (TFP) in the industry at the regional level from 1976 to 1995. To address the unique features of this marine resource industry, we include in our models some key geological variables such as water depth and field size. In addition, the results reveal that environmental regulation had a significantly negative impact on offshore production, although such impact has been diminishing over time.This research was funded by the United States Environmental Protection Agency STAR grant program (Grant Number Grant Number R826610-01) and the Rhode Island Agricultural Experiment Station (AES Number 5034)

Technological change and depletion in offshore oil and gas

This paper tests the hypothesis that technological change has offset depletion for offshore oil and gas production in the Gulf of Mexico using a unique micro-level data set from 1947–1998. The study supports the hypothesis that technological progress has mitigated depletion effects for our case study, but the pattern differs from the conventional wisdom for non-renewable resource industries. Contrary to the usual assumptions of monotonic changes in productivity or an inverted “U”-shaped pattern, we found that productivity declined for the first 30 years of our study period. But more recently, the rapid pace of technological change has outpaced depletion and productivity has increased rapidly, particularly in most recent 5 years of our study period. We also provide a more thorough understanding of different components of technological change and depletion

Assessing Liability for Damages under CERCLA: A New Approach for Providing Incentives for Pollution Avoidance

This paper examines the natural resource damage assessment regulations recently promulgated under CERCLA and their potential effectiveness. The regulations have a number of important characteristics, broad potential applicability, and their implementation has several novel features. For these reasons, the natural resource damage assessment regulations required by CERCLA potentially represent a major development in environmental policy. The regulations also may represent a major, and perhaps unprecedented, expansion of the use of economic incentives to control pollution. Examined within the paper are: the natural resource damage assessment framework provided by the Act, the conceptual and analytical underpinnings of the liability regulations developed to implement the Act, and the approach and institutional setting for administering the regulation

INVESTMENT, PRODUCTION AND RETURNS TO POTENTIAL PETROLEUM DEVELOPMENT ON THE OUTER CONTINENTAL SHELF

The purpose of this paper is to summarize briefly some results of an attempt to capture the major economic features of potential offshore petroleum developments on the Outer Continental Shelf (OCS), and it is part of a larger study by the author to examine the regional development aspects of offshore petroleum activities [ 9 J. The approach and results are discussed in Section ll. A summary and conclusions are contained in Section III

Controlling stochastic pollution events through liability rules: Some evidence from OCS leasing

Under the OCS Lands Act, firms are strictly liable for damages from oil spills. To the extent that this liability rule causes firms to internalize environmental risks, incentives for damage avoidance behavior are provided. Using data from the 1979 Georges Bank lease sale, we use a robust estimation technique to test the hypothesis that potential environmental costs are reflected in bids for OCS leases. The results indicate a substantial response to environmental risks. Recognizing reduced rents, we estimate that total high bids have declined by 20% because of firms\u27 perceptions of environmental risks. The results suggest that liability rules have considerable potential in controlling stochastic pollution events

Estimation of Income and Employment Multipliers for Marine-Related Activity in the Southern New England Marine Region

This paper summarizes some results of a Sea Grant-funded economic input-output study of marine-related activity in the Southern New England Marine Region. Data were obtained from 390 personal interviews; in addition, a wealth of secondary data was used. Type I and Type II income and employment multipliers were estimated for each of the nineteen marine-related industries included in the model. The results provide a basis to assist analysts concerned with assessing the impacts on regional income and employment of marine-related policies or developments proposed for the Region

Controlling Stochastic Pollution Events through Liability Rules: Some Evidence from OCS Leasing

Under the OCS Lands Act, firms are strictly liable for damages from oil spills. To the extent that this liability rule causes firms to internalize environmental risks, incentives for damage avoidance behavior are provided. Using data from the 1979 Georges Bank lease sale, we use a robust estimation technique to test the hypothesis that potential environmental costs are reflected in bids for OCS leases. The results indicate a substantial response to environmental risks. Recognizing reduced rents, we estimate that total high bids have declined by 20% because of firms' perceptions of environmental risks. The results suggest that liability rules have considerable potential in controlling stochastic pollution events.