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The AAPG/Datapages Combined Publications Database

Environmental Geosciences (DEG)

Abstract

 

Working Interest Optimization in the Transport and Burial of Hazardous Wastes

Evan K. Paleologos1and Ian Lerche2

1 Department of Geological Sciences, University of South Carolina, Columbia, SC 29208
2 Department of Geological Sciences, University of South Carolina, Columbia, SC 29208

Evan K. Paleologos received his Ph.D. in 1994 from the Department of Hydrology and Water Resources, the University of Arizona, and is currently an assistant professor in the Department of Geological Sciences at the University of South Carolina, Columbia. He specializes in physical aspects of flow and contaminant transport in porous media and in risk-assessment and decision-making issues of environmental projects. He is the recipient of several national and international grants and awards.

Ian Lerche is a professor in the Department of Geological Sciences at the University of South Carolina, Columbia. He specializes in physical and economic aspects of gas and oil exploration projects and has coauthored >14 books on these topics. He is the recipient of several national and international grants and awards that include the Levorsen award from the American Association of Petroleum Geologists, the 1991 Nordic Professor of Petroleum Geology award, and the 1996–1997 French Academy of Science Professor of Geology award. Dr. Lerche has led several international teams in basin characterization and modeling efforts.

Abstract

One of the major concerns decision makers face in deciding whetherto accept a contract for transport and burial of hazardous wastesis whether there will be spillage during transportation and/orleakage after burial, both of which could significantly impactcorporate profitability. To mitigate the possible negative impactof such events, two avenues of damage control are commonly invoked.First, some predetermined risk tolerance is usually establishedthat will not be exceeded for involvement in a project withoutextremely good reason. Second, potential exposure to the negativeaspects (spillage and/or leakage) of a project is limited byassuming<100% working interest in a contract. Although suchfractional involvement lowers potential gains, it also mitigatespotential liabilities, thus preserving corporate fiscal integrity.

The present study illustrates how such decisions can be madedependent on a level of tolerance to risk and subject to theestimated probabilities of success and failure (spillage and/orleakage), together with the associated costs of various probableevents. Exponential and parabolic utility models are employedto demonstrate how decision makers can evaluate a project andassess, for a given contract price, whether involvement in theproject is warranted, what fraction of a contract maximizesthe return to a company, what is the range of financially viableworking interests, and how acceptance of a project, under uncertainconditions and with variable potential expenditures, could influencecorporate profits.

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