Dynamic optimization model of energy related economic planning and development for the Navajo nation

Thesis/Dissertation · Sat Jan 01 04:00:00 EST 1983

OSTI ID:6892637

Beladi, S A

The Navajo reservation located in portions of Arizona, New Mexico and Utah is rich in low sulfur coal deposits, ideal for strip mining operation. The Navajo Nation has been leasing the mineral resources to non-Indian enterprises for purposes of extraction. Since the early 1950s the Navajo Nation has entered into extensive coal leases with several large companies and utilities. Contracts have committed huge quantities of Navajo coal for mining. This research was directed to evaluate the shadow prices of Navajo coal and identify optimal coal extraction. An economic model of coal resource extraction over time was structured within an optimal control theory framework. The control problem was formulated as a discrete dynamic optimization problem. A comparison of the shadow prices of coal deposits derived from the dynamic model with the royalty payments the tribe receives on the basis of the present long-term lease contracts indicates that, in most cases, the tribe is paid considerably less than the amount of royalty projected by the model. Part of these discrepancies may be explained in terms of the low coal demand condition at the time of leasing and due to greater uncertainties with respect to the geologic information and other risks associated with mining operations. However, changes in the demand for coal with rigidly fixed terms of royalty rates will lead to non-optimal extraction of coal. A corrective tax scheme is suggested on the basis of the results of this research. The proposed tax per unit of coal shipped from a site is the difference between the shadow price and the present royalty rate. The estimated tax rates over time are derived.

• OSTI ID: 6892637
• Country of Publication: United States
• Language: English

Related Subjects

01 COAL, LIGNITE, AND PEAT
015000 -- Coal
Lignite
& Peat-- Economic
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
294001 -- Energy Planning & Policy-- Coal
AMERICAN INDIANS
COAL INDUSTRY
COAL MINING
DEMAND FACTORS
ECONOMIC DEVELOPMENT
HUMAN POPULATIONS
INCOME
INDIAN RESERVATIONS
INDUSTRY
MINING
MINORITY GROUPS
PLANNING
POPULATIONS
PRICES
ROYALTIES