Avoiding Environmental Remediation Through Temporary Closure

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Avoiding Environmental Remediation Through
Temporary Closure
Lucija Muehlenbachs University of Maryland
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• Alberta
• 350,273 oil and gas wells
• 42,000 are inactive
• Texas
• 354,616 oil and gas wells
• 114,259 of which are shut-in,
• depleted and are not expected
• to produce another barrel of oil

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Environmental Impacts

• Gas migration
• Drinking water contamination
• Naturally Occurring Radioactive Material

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Real Options in Natural Resources

• Brennan and Schwartz (1985)
• Paddock, Siegel and Smith (1988)
• Dixit and Pindyck (1994)
• Slade (2001)
• Mason (2001)
• Moll (2001)
• Moel and Tufano (2002)

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Option to Reactivate
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Option to Abandon
Option to Reactivate
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Maintenance Cost
Option to Abandon
Option to Reactivate
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Value of Abandoning Or Mothballing
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