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Recording ownership of mineral-related assets

Outcome paper:English
Cover note:English    Español
Comment template:English    Español
Global consultation status:Open
Deadline for comments:28/10/2010
Number of comments:15
Comments from the global consultation
Posted onProvided byComments
23/12/2010Central Bureau of Statistics Israel1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes.
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes.
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
Yes.
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Yes.
04/11/2010Switzerland/Federal Statistical Office1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
Yes
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Yes
02/11/2010w Zealand/Statistics New Zealand5. Any other comments?
Statistics New Zealand does not currently have sufficient subject matter expertise to comment on the questions raised for issue 15b: Recording the ownership of mineral related assets. Relevant agencies were contacted but did not feel in a position to comment on the specific questions raised.
29/10/2010Netherlands/CBS1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
We would favour option 3B in which the resource as well as depletion is split between owner and extractor based upon expected resource rents and royalty flows, however with a small modification. We believe it would be more accurate (following the example provided by Carl) to allocate the full resource rent to the legal owner for the years in which no concessions have been granted and not as suggested here to continue to assume that the small flow of royalties will continue in the future. The reason being that we do not know the intentions of the government at this stage - it could for instance decide to wait with further development of the resource, or decide to appropriate virtually all resource rents in the future. The attached xls provides the worked through example which results in a higher value on the balance sheet of the legal owner and slightly different depletion charges.
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
See above.
  5. Any other comments?
No.
29/10/2010Malaysia/Department of Statistics1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
Yes
  5. Any other comments?
1. The Department of Statistics Malaysia (DOSM) has no experience in developing any environmental account using the SEEA framework. However, DOSM is currently trying to develop one of the SEEA account (eg Water account) with the experience and knowledge gain while visiting Australia Bureau Statistics (ABS), and also with the guide of the SEEA 2003. However DOSM, experience constrains in developing this account with lack of expertise in this field, human resources and budget. 2. DOSM also wants to learn in detail how to develop the SEEA account. Please inform and include us if there is any training/workshop to be conducted in future. 3. Therefore DOSM is unable to contribute fruitful comments for the revision of the SEEA. However, DOSM would like to be involved in further development of this matter.
28/10/2010United Nations Statistics Division1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
Yes, in case the extractor is the legal owner. If the extractor is only the economic owner, the calculation of the depletion and the income component to the legal owner is not straight forward.
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Yes
  5. Any other comments?
No
28/10/2010United Kingdom/Office for National Statistics1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
This was considered less straightforward. There was some support for partitioning the depletion between the legal owner and extractor as per part 1, but on balance the proposal is considered an acceptable way forward.
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Yes.
  5. Any other comments?
No.
28/10/2010Canada/Statistics Canada1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Agree. The Canadian SNA (CSNA) shows the monetary values associated with the stock of natural resources on the National Balance Sheet (NBS). CSNA also has sector income associated with natural resources, but no related sectoral assets. Although corporate equity at market value reflects swings in the value of resources, we are missing this key asset on the SNA corporate sector balance sheet. Having a sectoral asset that corresponds to a sector’s income is important and could lead to improved estimates of net worth on the government and corporate sides. Sectoring of natural resources is seemingly not well thought out in SNA93/08. As noted in 15a, this standard assumes that resources belong to governments. Some concerns in relation to the impact of partitioning on government net debt are noted in the final comments section.
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Partly disagree on practical grounds Paragraph 54.1 notes, “option 2 and option 4 are closely related in that option 2 represents the results that would be obtained if the resource life ended at the expiry of the extractive licence.” We would argue that it seems reasonable to assume that in cases where the license is shorter than the resource life, another extractor would likely undertake to mine the resource and would likely do so under similar circumstances “as those operating under the current extractive licence.” As noted further in 54.1, “if this was assumed to be the case then there would be no need to partition the value of the mineral resource over time as done in option 4 and the resulting accounting entries would be the same as under option 2.” In short, if the above assumptions are reasonable, there is a reasonable argument for simply following option D2. Also, as alluded to in 54.7 (and as our knowledge of the Canadian situation seems to confirm) there are likely many data gaps in regards to the length of extractive licenses for the breadth of minerals under consideration. This could render the task of partitioning resources along these (option 4) lines very difficult if not insurmountable in some countries.
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
We have yet to fully contemplate the implications of this aspect
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
We have yet to fully contemplate the implications of this presentation.
  5. Any other comments?
Consideration should be given to the impact that adopting these options may have with respect to government net debt. In our estimation, if option 2 (or option 4) is applied, there may be implications for government net debt. There are ramifications to making large historical revisions to this important economic measure; these should be taken into consideration by the London Group.
28/10/2010Botswana/Central Statistics Office 1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes. It is important to consider the share amount of the two.
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes, since the legal owner (which is normally the government) is the custodian of the resource and therefore is up to them to decide the future of the resource.
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
No. It should be split between the legal owner and the extractor because the former will forgo some parts of the resource that was extracted
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Yes. both the royalties and the remaining resource rent accruing to the extractor should be partitioned.
  5. Any other comments?
A well defined ownership of resources is crucial and the responsibility therein for resources should also be explicit and clear. There is also a need for guide with regard to the use of resource rent for the maintenance and conservation of the environment and other renewable resources to compensate for non-renewable resources.
28/10/2010Mexico/INEGI1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes, we agree. There is an income distribution between the parties, because is already exist a legal contract which let to distinguish both ownership and transfer of rights of resource use. The recording of this income is given by the payment of the operating permit or by paying royalties. This enables the legal owner retains part of the resource rent.
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes, we agree. In order to consider that mineral and energy resources have an useful life that may be more extensive than the period of the operating license, so that at the end of the license the value of the existing resource will revert to the legal owner of this.
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
Yes, we agree, and it should be recorded by the extractor while the period of the license remains valid. Depletion is recorded as a capital transfer paid by the extractor to the legal owner through payment of royalties and license. It should be noted that when the property is divided, both extractor and the legal owner, have to record the costs of depletion.
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Yes, we agree. Because of the extraction is recorded as a payment of the debt from future royalties flow through the extraction and depletion of minerals. In the economic accounts are recorded as a financial asset or liability, this is done by registering a financial transaction between the extractor and the legal owner equal to the cost of depletion. In addition, there is a payment of interest on royalties that are displayed in the income accounts on both sides.
  5. Any other comments?
Not at the moment
28/10/2010Denmark/Statistics Denmark1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes, However, if the definition of depletion is introduced as suggested in relation to issue #13, and this depletion is attributed to the extracting activities it is not possible to make a consistent accounting for stocks and flows. In that case it seems necessary only to account for the value for the economy as a whole.
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
As stated in the conclusions of the outcome paper the suggested treatment implies that there is still difficult accounting entries to reconcile and it will not be straightforward to implement. Especially, there is a need to explain the occurrence of an “other volume change” for the owner of the asset and more generally to develop how a consistent recording of the depletion can be obtained. It seems that there are still open questions related to this, and since there is not much experience in countries with this we cannot recommend that it is included as a stistical standard in volume 1.
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
We support the financial lease/liability recording of royalty payments if the split asset option is introduced.
28/10/2010Lebanon/Central Administration of Statistics1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Yes
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Yes
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
Yes
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Yes
  5. Any other comments?
No comment
28/10/2010Australia/Bureau of Statistics1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
It is not necessary that an asset be partitioned in these circumstances. While a theoretical case can be made for partitioning of an asset, the ABS is very reluctant to go down this path unless it can be shown that economic and environmental analysis is enhanced by such an approach. A standard finance lease recording where the whole of the asset is recorded on the balance sheet of the extractor is preferred by the ABS in the context of SEEA. This approach is attractive because all of the mineral assets, mineral production, depletion and depletion adjusted income and value added are all recorded in the accounts of the extractor. It gives the best illumination of the environmental flows and assets.
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
In principle, yes. However, in Australian circumstances, extractive licenses are long term with provisions for extensions. In practice, extractive licenses are likely to be for much of the economic life of the mineral asset. In the event that a license reaches its end, the legal owner (the government) would be likely to re-issue it to another extractor in the same institutional sector assuming the resource is still economically viable.
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
Yes.
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Yes. The royalty payment and receipt should be reclassified into an income component (interest) and a repayment of principal consistent with the recording of a finance lease. This will change sector income and saving relative to the SNA, but as the objective for the purpose of environmental accounting is to record depletion as a deduction from income, the measures of income and saving in the SNA and SEEA will necessarily be different.
  5. Any other comments?
ABS regards Option 4 as a variation on Option 2. It could be supported in certain situations which are unlikely to apply in the Australian context. It is difficult to envisage a situation where the legal owner (the government in Australia) becomes the extractor after the end of a mining lease. It would almost certainly re-issue the lease to another mining company provided it still has economic value. It should also be noted that the NPV of a future rental stream tends towards zero after 30 or more years so the use of a 5 year extractive license in the example given is likely to exaggerate the proportion of the asset that would be recorded on the balance sheet of the legal owner at the inception of the lease. If a lease of 20 or more years were chosen in the example the substance of the recording tends towards Option 2.
28/10/2010China1. Do you agree that in cases where there is some sharing of resource rent must there be an effective partitioning of the value of the mineral and energy resource between the legal owner and the extractor?
Resource rent is belongs to legal owner.
  2. Do you agree that the economic ownership of a mineral and energy resource should revert to the legal owner at the end of an extractive licence?
Ownership is belongs to legal owner.
  3. Do you agree that the entire amount of depletion should be recorded in the accounts of the extractor?
Not sure
  4. Do you agree that the royalties payable by the extractor should be partitioned in cases where there is depletion of the mineral and energy resource?
Not sure
27/10/2010Pakistan/Federal Bureau of Statistics5. Any other comments?
Same “Reply” as given under Issue # 4
 

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