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The Workback Method and the Value of Helium

Braeutigam, Ronald R. (1979) The Workback Method and the Value of Helium. Social Science Working Paper, 274. California Institute of Technology , Pasadena, CA. (Unpublished)

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It is sometimes the case that the value of a resource at one stage of production must be assessed in the absence of a well defined market at that stage. One tool for valuation is the "workback" method, which imputes a value to a resource at an early processing stage by subtracting from an observed price for the resource at a more refined stage all of the costs incurred between the two stages. The workback method has been used by the courts in attempting to assess the wellhead value of helium extracted from helium-bearing natural gas streams during the Helium Conservation Program. This paper describes conditions necessary for a correct application of the workback method generally, and then provides an economic analysis of two court decisions using the workback method in the helium industry. Most importantly, the paper shows why a correct application of the workback method requires an understanding of market structure, whether the method is applied to helium, other natural resources, or more general multistage production processes.

Item Type:Report or Paper (Working Paper)
Additional Information:This research was supported in part under a DOE grant, EY-76-G-03-1305, EQL Block. I wish to thank the Environmental Quality Laboratory at the California Institute of Technology for its assistance in this work. I would also like to thank Dennis Dutterer, John Lindskold, Roger Noll, Bruce Owen, James Quirk, and F. M. Scherer for their helpful comments on an earlier draft.
Group:Social Science Working Papers, Environmental Quality Laboratory
Funding AgencyGrant Number
Department of Energy (DOE)EY-76-G-03-1305
Series Name:Social Science Working Paper
Issue or Number:274
Record Number:CaltechAUTHORS:20171016-155159147
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82393
Deposited By: Jacquelyn Bussone
Deposited On:17 Oct 2017 23:24
Last Modified:03 Oct 2019 18:54

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