Modeling Rare Events: Using a Fixed/Variable Rate Model for an Arctic Oil Spill Rate Example

Abstract

:Occurrence rates for rare events must often be estimated with limited data of unknown and changing applicability; thus, many risk models rely on average measures of risk even though more accurate possibilities may exist. A generalized approach is presented for selecting the best model of the rare event risk and for matching how the results are presented to decision-making needs. The process is illustrated using a case study of estimating oil spill rates from undersea pipelines that serve production platforms on the Outer Continental Shelf areas of the Gulf of Mexico. Existing models use average oil spill rates from these undersea pipelines, but many of these spills occur at a platform; thus, a new approach using a fixed/variable rate framework is suggested. We review the literature on modeling of Outer Continental Shelf oil spill rates, analyze historical oil spills for the estimated rates for both models, and contrast the results (that can differ by up to a factor of 2) for Arctic applications. Other quantitative applications for deeper, more distant wells in the Gulf of Mexico, air and spacecraft flights, maintenance of nuclear facilities, and failure of project activities are suggested. The proposed model is based on estimating average rates for the fixed and variable components. This model is placed on a continuum of risk models based on their data requirements, which provides a new conceptual framework for risk model “levels.” Implications for qualitative mental models of risk are also suggested; thus, there are many potential applications in risk models used by managers and operators.