From Assets to Liabilities: Applied Net Present Value Profiles in Resource Project Failure and Rescue

Governments around the world increasingly acquire, rescue, or inherit capital-intensive projects that private actors are unable or unwilling to complete, operate, or remediate. These interventions are often framed as exceptional policy failures or discretionary rescues. This paper argues instead that such outcomes reflect a structural feature of capital-intensive projects: long-lived obligations associated with environmental risk, site-specific assets, and public safety cannot be extinguished through market exit alone. Building on the concept of forward-looking project valuation, the paper develops a complementary institutional framework that focuses on the costs and constraints of state operation after private exit has occurred. The analysis shifts attention from project-level profitability to institutional capacity, emphasizing that state ownership entails the assumption of complex operational, regulatory, and governance responsibilities that generate real economic costs over time. These institutional costs are endogenous, state-contingent, and often amplified under conditions of deep uncertainty and project failure. Using stylized examples drawn from resource extraction, infrastructure, and environmental remediation, the paper shows how projects may transition from productive assets to pure liabilities, and why governments frequently become residual claimants by necessity rather than by choice. The framework highlights the intergenerational consequences of deferred remediation and underinvestment in institutional capacity, and reframes state intervention as a response to persistent project-level obligations rather than as an ideological departure from market governance. The contribution of the paper is conceptual rather than prescriptive. It does not propose optimal ownership structures or regulatory instruments. Instead, it provides a structured way to analyze the economic significance of institutional capacity when governments assume responsibility for capital-intensive projects whose liabilities outlive private profitability.