Resume of Janie M. Chermak, 1993-08

Naval Postgraduate School Faculty Resum

Understanding the Emergence of Public Debt

We use a controlled laboratory experiment with and without overlapping generations to study the emergence of public debt. Public debt is chosen by popular vote, pays for public goods, and is repaid with general taxes. With a single generation, public debt is accumulated prudently, never leading to over-indebtedness. With multiple generations, public debt is accumulated rapidly as soon as the burden of debt and the risk of over-indebtedness can be shifted to future generations. Debt ceiling mechanisms do not mitigate the debt problem. With overlapping generations, political debt cycles emerge, oscillating with the age of the majority of voters

A Well-Based Cost Function and the Economics of Exhaustible Resources: The Case of Natural Gas

A cost function for natural gas production is estimated, using a pool of data from 29 wells. Statistically exact tests are performed for parameter stability across locations, formations, wells, and producing firms. Costs are determined to be inversely related to remaining recoverable reserves, and marginal costs of production are decreasing in all cases. Theoretical implications of these cost characteristics on optimal exhaustible resource extraction are analyzed. Although marginal cost is decreasing, production effects on the resource stock imply that an interior production path may be optimal. Conditions under which production optimally occurs at the capacity bound are delineated, and optimal interior production paths are characterized.Gas Research Institut

Emerging Environmental Markets: Improving the Competitiveness of Natural Gas

Current U.S. regulations focus on market approaches to reduce SO2, NOx, and CO2 pollution, allowing affected firms to choose the least-cost compliance alternative. Natural gas, a relatively benign fuel from an environmental perspective, could realize a substantial increase in demand if it is competitive. The viability of gas as an alternative has been questioned due to high forecast price and unstable supply. This paper assesses potential efficiency gains in the completion and production of natural gas wells which may lower production costs and increase recoverable reserves. Coupled with the premium that can be paid for its environmentally desirable qualities, gas can potentially be a feasible alternative. However, the window of opportunity is limited, because many industries, such as electric power generation, require decisions involving up-front capital expenditures that lock the firm into a specific compliance mechanism and fuel.

Technological Advancement and the Recovery of Natural Gas: The Value of Information

Accurate information on geology, petroleum engineering, and economics is essential for firms to make efficient decisions concerning if and, if so, how to produce natural gas wells. Improved information may not only help insure that wells are economic, but may also lead to reduced costs of production and an increased physically recoverable stock of the resource. This paper empirically applies the economic theory of exhaustible resources (extended to include necessary reservoir engineering) to evaluate the benefits obtainable from using an enhanced information technology developed by the Gas Research Institute. The wells analyzed indicate significant benefits are obtainable with appropriate use of the new technology. The magnitudes of these benefits vary across reservoir characteristics.