State mineral production taxes and mining law reform

Fuel and leasable minerals mined in the United States have historically been subject to federal royalties while locatable minerals have not. In recent years there have been multiple attempts to alter this policy and subject locatable minerals to federal royalties as well; most recently the preliminary 2012 Obama budget included a gross royalty on hard-rock mining on public lands. This paper analyzes the issue of imposing such federal royalties from both a legal and economic perspective. From a legal perspective, it is argued that the state of western property rights precludes royalties on currently extant claims so revenues from a royalty would not be realized for many years. From an economic perspective, it is argued that the effect on revenue would be smaller than one might anticipate due to such a royalty crowding out state levies or encouraging vertical disintegration on the part of mining firms to avoid much of the burden of the royalty.     

Net value royalties : Practical tool or economist's illusion?

The petroleum industry has traditionally generated substantial revenues for governments. Where governmental power is divided, as in federations like Canada and Australia, a junior level of government normally collects royalties while the senior level levies a variety of imposts (income tax, export duties, excises on production). The combination of recent sharp reductions in prices, more price volatility and an era of freer markets has subjected existing tax and royalty systems to severe strain and has shifted attention to the design of fiscal systems that are more profit- sensitive. For the royalty element, interest focuses on net value royalties (NVRs). This paper deals with the nature and problems of NVRs. It proceeds by looking first at the application of resource rent royalties in Australia. It then focuses on recent megaproject royalty arrangements in Alberta and evaluates the degree to which Alberta's current royalty system is profit- sensitive. Problems associated with NVRs are discussed in the fourth section; concluding remarks are made in the last section.     

Petroleum royalties and regional development in Brazil: The economic growth of recipient towns

In 1997, Brazil approved law n^er 9478, establishing new rules for sharing petroleum royalties with Brazilian municipalities. The goal of this paper is to evaluate whether royalties distributed under the new law have contributed for the development of benefited municipalities. For that the difference-in-differences estimator (diff-in-diff) is used, which compares the evolution of the economic product into the municipality affected by the new law with the unaffected ones, by exploring the new legislation as an exogenous change. The data refer to the municipal gross domestic product (GDP) growth rate before and after the event. Results are surprising, showing that royalty receivers grew less than municipalities that did not receive such resources. The difference is small but statistically significant. In general, an increase of one real in royalties per capita reduces the growth rate of the municipal product in 0.002 percentile points.     

Informal coal mining in Eastern India: Evidence from the Raniganj Coalbelt

Unauthorized mines are not uncommon in mineral-rich regions of poorer countries, and India is no exception. Whether they constitute merely a law and order problem including safety issues, or there are important social and economic questions involved has yet to be thrashed out. The mining industry, at regional, national and international levels, is ambivalent towards such mining, tending to draw attention away from their informal nature to the size factor.
This article looks into the problem of such informal mining in the light of empirical surveys in eastern Indian collieries. These are called peoples' mines and they serve a significant purpose in local economies. The article's thesis is that peasant communities are trying to claim back a portion of the local resources lost to them through appropriation by mining companies thus re-asserting their traditional rights to local mineral resources. In conclusion, the need for a new moral economy for mining regions is stressed: an economy in which local communities will play a powerful role.     

Game theory and environmental disputes

The courts have provided the traditional battleground for conflicts between environmental interest groups and those whose actions in some way have an adverse impact on the environment The judicial process is a time-consuming one in which all sides usually must concede to some points. Environmental disputes involve complex scientific issues which the court system is not set up to comprehend, so that the process gives the parties to a dispute the sense of having lost control of their own destinies. An increasing number of parties to environmental disputes are turning to negotiation, or mediation, as an alternative in which they can be active parties in the settlement-making process rather than the victims of a court-imposed solution When do the parties to a dispute choose a negotiated settlement over a court battle? To what extent does each party make the concessions necessary to reach an agreement? These questions can be answered by the game theory that provides a model for analyzing the negotiation process. This paper will apply game theory to two environmental conflict cases A series of questions pertinent to the analysis of all environmental disputes will be raised     

Efficient taxation of resource income : The case of copper mining in British Columbia

This article continues previous research by the authors into the economic efficiency of two actual tax systems, one relying on a mining profits tax and the other on a gross royalty. The relative efficiency of the royalty-based taxation system is found to be conditioned by the share of resource income sought by the province: at low tax rates there is little difference between the two systems, while at high rates the royalty system is markedly less efficient. The efficiency comparisons are quite consistent over different expected price levels. However, they are influenced significantly by the flexibility of mining operations, which in practice is associated with the ability to produce ore systematically in order of diminishing quality. Curtailed flexibility renders the royalty-based system relatively less efficient.     

Abandoned artisanal gold mines in the Brazilian Amazon: A legacy of mercury pollution

The modern gold rush in the Brazilian Amazon attracted millions of people to become artisanal miners in order to escape complete social marginalization. The rudimentary nature of artisanal mining activities often generates a legacy of extensive environmental degradation,both during operations and well after mining activities have ceased. One of the most significant environmental impacts is derived from the use of mercury (Hg), which is illegal for use in gold amalgamation in Brazil, but continues to be the preferred method employed by artisanal gold miners. The general population is unaware of the capricious nature of mercury and artisanal mining activities. Moreover, individuals in positions of political or economic infiuence tend to be negatively biased towards artisanal mining and government policies do not effectively address the realities of these activities. Affected communities have consequently been ignored,and mistrust towards outside parties is high. Not surprisingly, miners are suspicious of and unlikely to employ externally derived solutions to reduce mercury emissions. This article reviews the use of mercury in artisanal mining and highlights the role miners, governments and non-governmental organizations (NGOs) have played in communicating facts, perpetuating myths and deriving solutions for mercury pollution. This article also raises some key concerns that must be addressed to understand the behaviour of mercury in the environment and identifies solutions for problems facing communities where artisanal gold mining operations have been abandoned.     

Manganese nodules and marine technology

This article examines the problems and prospects of manganese nodule mining. The technological requirements for the exploitation of nodule deposits are considered, superimposed on an interdisciplinary policy-oriented approach. The technological dimension is emphasized because its crucial importance is often underrated when deep ocean mining is assessed. This dimension cannot be divorced from the interactions between economics, international law and oceanography. The technological problems and opportunities of nodule mining are diverse. Provided delays at the UN and economic uncertainties do not channel some of the interest into land-based alternatives, this could be an important area of future technical development.     

Mineral development,financing and cooperation: New forms of international participation?

Although relations between direct investors and host countries must steadily evolve to meet continually changing circumstances, this should be within a broadly stable framework. The basic technical and economic characteristics of mining should dictate the nature of that framework. In contemplating their experiences during the past decade many international mining companies might ruefully agree with Benjamin Franklin that: ‘in this world nothing can be said to be certain except death and taxes’. The aim of this paper is to highlight some of the important factors that must be taken into account by governments, international agencies and private investors contemplating large-scale mining projects. These inevitably dictate the forms of international participation in mining ventures.     

MINING AGREEMENTS IN DEVELOPING COUNTRIES-ISSUES OF FINANCE AND TAXATION

This article continues a Forum series on recent trends in mining contracts between host countries and foreign investors begun in the April 1977 issue. Based on intensive research carried out for the preparation of a book on Mining Ventures in Developing Countries , published recently in the Federal Republic of Germany, the authors discuss sources of finance, institutions, exchange controls and special accounts, royalties, income taxation, and equity participation. They conclude that taxation is most likely to remain the principal source of income; equity participation should be evaluated carefully as it does not automatically guarantee maximum benefits. The combination of taxes and royalties provide a steady flow of income. An increase of the total tax burden beyond a certain percentage may be counterproductive for the host country, as it encourages the investor to look for less controllable means of shifting profits or discourages investment for exploration and development.     

Development of Australia's North-West shelf gas reserves

The development of Australia's North-West Shelf gasfield is the largest single private venture yet undertaken in Australia, with expenditure of around A$3000 million. Gas will be exported (primarily to Japan), and there will be local sales, at present confined to the state of Western Australia. Annual revenue is estimated to be A$743 million (in 1977 prices) over the life of the project, with annual tax and royalties rising to A$330 million once loans are repaid. The net effect on Australia's balance of payments is positive in most years. The project's apparent feasibility has provided an impetus to further offshore exploration in the West, with A$400 million now committed.     

Uneven Environmental Management: A Canadian Perspective

Advocates of community-based approaches to environmental management argue that by respecting local circumstances, skills, and concerns we may improve the prospects of achieving environmental sustainability; yet, within nation states such as Canada, environmental conditions, management and enforcement costs and capabilities, and power differentials within and among civic and public sectors may result in a highly differentiated capacity for environmental management across different localities and regions. This article draws on insights of political ecology to 1) create a conceptual framework that identifies key elements shaping regional environmental management regimes and to 2) undertake a comparative analysis to assess how elements interact to generate uneven management outcomes. I compare experiences of two Canadian biosphere reserves designated in 2000: Clayoquot Sound, BC; and Redberry Lake, SK. Analysis reveals that differences in governance and institutional capacities in the biosphere reserves are key to explaining uneven local outcomes. Where the public and civic sectors are strong, a robust and publicly vetted form of management will emerge. Where these sectors are weak and land is held as private property, environmental nongovernmental organizations can set the type and level of management, to the exclusion of effective civic and state involvement. This result may improve environmental sustainability but hinder social sustainability of a management regime and raises questions about the efficacy of community-based management.     

Conservation networks,integrated and sustainable land use in a tropical frontier — the Cape York Peninsula region,Australia

Summary After discussing methods for and the difficulties of determining optimal land use, particularly in relation to conservation and sustainability issues, prospects for establishing conservation networks so as to preserve the wildemess characteristics of the Cape York Peninsula area are considered. According to a number of international studies, nature conservation in this region should be given a high priority. While Cape York is sparsely settled, it is not, however, a complete wilderness. Mining, cattle ranching, forestry, fishing, tourism and land use by Aborigines, frequently conflict with nature conservation in this region. But most of the land currently belongs to the Crown (State), even though Crown title is now subject to counter-claims by Aborigines following the Mabo case which is outlined, and most is held as leasehold by its users. In theory, leasehold from the Crown should give considerable scope for altering land use in the region, and instituting a system of conservation networks in the area based on core protected areas, such as those suggested by the Wildlife Preservation Society of Queensland. Nevertheless, strategic land use planning for Cape York Peninsula is difficult because knowledge about the stock of natural resources and current land uses in the region is very imperfect, and conflicts between interest groups at the regional, State and national level are unlikely to allow for easy harmonious resolutions of land use disputes.But an encouraging sign in favour of nature conservation as a land use in Cape York Peninsula is its low economic opportunity cost, except where it comes into conflict with mining. Net returns from extensive pastoralism appear to be negative and economic returns from forestry are low. Tourism could be compatible with conservation. Potential conflicts with mining could be taken into account in the early planning stages of conservation networks by gazetting very large nature reserves and at a later time allowing some portions to be assigned for mining. The royalties from such mining might be used as transfer payments to benefit further conservation efforts in the region.Dr Andreas E. Hohl is a staff member and Professor Clem A. Tisdell is a Department Head of the Department of Economics at the University of Queensland.     

Oil windfalls in Brazil and their long-run social impacts

In 1997, Brazil changed the regulatory framework of its oil and gas sector. After this change, a restrict subset of localities started to receive large amounts of oil rents. The goal of this paper is to evaluate whether such rents distributed under this law contributed to improving some social indicators relative to the national average in the eligible municipalities. We used a “difference-in-differences” measurement to compare changes in selected social indicators within affected Municipalities in the last two decades, taking the unaffected districts as control group. The Municipal data on social indicators were collected from three National Censuses, conducted in 1991, 2000 and 2010. Results show that royalties had a positive and statistically significant impact on household’s access to electric wiring, piped water and waste collection, as well as in the decrease of illiteracy rate. This means the eligible districts were able to improve some of their social indicators in the long-run.     

Balancing environmental and industry sustainability: A case study of the US gold mining industry

Mandatory insurance requirements and/or mitigation fees (royalties) for mining companies may help reduce environmental risk exposure for the federal government. Mining is examined since the Environmental Protection Agency (EPA) Toxic Release Inventory reveals that this sector produces more hazardous waste than any other industrial sector. Although uncommon, environmental expense can exceed hundreds of millions of dollars per development. Of particular concern is the potential for mines to become unfunded Superfund sites. Monte Carlo simulation of risk exposure is used to establish a plausible range of unfunded federal liabilities associated with cyanide-leach gold mining. A model is developed to assess these costs and their impact on both the federal budget and corporate profitability (i.e., industry sustainability), particularly if such costs are borne by offending firms.     

The Ethiopian mining sector

The Ethiopian Constitution of 1928 vests in the state ownership of all mineral resources. However, the mining code of 1944 recognized the right of individuals and private companies to explore for and develop those resources. The results were quite impressive; Ethiopia became a producer of gold, platinum, copper and other minerals. A revised mining code in 1971 further extended the rights of individuals and companies to develop the mineral resources of the country. In 1974, the newly established revolutionary government eliminated private ownership of mines and established instead state-owned mining companies to develop the mineral resources of the country. In time, the demand for government funding by other sectors of the economy left little for the mining sector and it went into decline. To correct that problem, the Government of Ethiopia in 1989 decided to again make private ownership in the mining sector legal. This paper describes some of the recent initiatives to open the mining sector to private enterprise.     

Patience is a virtue: Problems of regulatory governance in the Indonesian mining sector

Mining investment in Indonesia has been at a standstill for a decade. Clearly. international mining companies regard the country as a high risk destination for capital. Yet Indonesia is one of the most highly mineralised countries in the world and has expressed a desire to increase investment in the sector in the coming years. As a first step in this direction the government has introduced a new mineral and coal mining law to replace the highly regarded Contract of Work system. The government argues that this new law will reinvigorate mining investment in the country. This paper suggests that the new mining law will do little to improve the situation. Indeed, it is unlikely that Indonesia will become a preferred destination for mining investment in the foreseeable future. Poor regulatory architecture, endemic corruption, and a lack of institutional capacity continue to be of concern to investors.     

以布迪厄“场域和惯习”理论解读环保法律实施困境

大气污染防治行动计划、限温令等环保法律政策实施的困境表明,法律既是由国家制定和认可,由国家的强制力保证实施的特殊行为规则,又是一种社会实践,法律和法约束主体的互动会影响法律实施的效果。通过分析布迪厄的＂场域和惯习＂理论对环保政策困境的解读,提出了以环保场域中各个社会行动主体的利益、利益关系为切入点,改变社会行动者的环保惯习;以位置为切入点,形成良好的环保场域;针对环保场域中各个不同的位置和利益诉求采取不同激励措施三点建议。     

The case of artisanal mining in Bolivia: Local participatory development and mining investment opportunities

Despite the buoyant expansion of Latin America's mining sector, the small-scale mining sub-sector remains marginalized. For many countries with small-scale mining resources, the way forward to sustainable mining development is not clear. Activities, in far too many cases, have led to environmental damage, social inequity and political violence among mining communities. This article, through a case study of the Bolivian Altiplano, seeks to advance the understanding of the conditions that drive mining communities into the chain of events of impoverishment associated with environmental damage. It also examines the opportunities for sustainable human development among these communities. In Bolivia's mining sector, social inequity is pervasive and holds the mineral resources captive. This situation is further aggravated by the fact that solutions, in the short term, are uncertain. Unresolved social inequity compromises foreign direct investments since social considerations are becoming increasingly important to mining corporations when deciding whether to invest. This article outlines a preliminary strategy to move forward on social inequity. The strategy revolves mainly around implementing alternative sustainable livelihoods with the participation of the government (central and local), the private sector, NGOs and donors as facilitators and partners. Its aim is to reduce the number of families eking out a living from artisanal mining in order to enhance the viability of small-scale mining. It is hoped that, as social inequity decreases throughout the sector, the increased stability will enable stakeholders to consider foreign direct investments within the framework of the country's sustainable human development goals.     

Simulating Direct and Indirect Damages to Commercial Fisheries from Marine Sand Mining: A Case Study in Korea

Rapid growth in marine sand mining for construction and other uses poses environmental challenges to coastal nations virtually worldwide. Yet the development of management policies, such as a system of fees imposed on operators for damage caused by mining, has been frustrated by a lack of studies to support such measures. Adapting a Beverton-Holt bioeconomic model, this paper attempts to contribute to the estimation of external costs to commercial fisheries due to marine mining. Using the major mining area of Ongjin in Korea as a case study, we estimate economic losses in use value of commercial fisheries through the time to recovery of the injured resource stocks. Present value of lost catch over a 1-year period from mining to resource recovery is estimated at $38,851 for a single “prototype” mining site. Estimated cumulative damages due to recurring mining for 5 and 10 years are $1.5 million and $2.2 million, respectively, at 20 mining sites. Sensitivity analyses are used to examine the effects of alternative assumptions to assess the many sources of uncertainty. Using a form of meta-analysis, dose-response information is used to assess the excess mortality the mining sediment plume has on eggs and larvae and, ultimately, on the value of lost catch ($841). Also addressed is the importance of specifying the appropriate “premining” conditions against which to assess environmental losses at the mining site. Damages estimated with premining fish populations are $23,066 higher than is the case using postmining conditions. Overall, the illustrative results suggest the variety of complex conditions which influence damage to fisheries from mining and which can benefit from further study to improve management guidelines. An erratum to this article can be found at