Acknowledgments xi About the Authors xiii Abbreviations xv Overview 1 What Should We Know about the Extractive Industries Sector? 1 Notes 8 Organization of this Volume 9 Chapter 1 Defining Sector Policy Objectives 11 The Extractive Industries Value Chain 11 Improving Revenue Mobilization 12 Generating Extractive-Based Economic and Social Development 13 Note 14 Chapter 2 The Economics of the Extractive Industries Sector 15 Accounting for Physical Stocks: Resources, Reserves, and the Economic Interpretation of Ore 15 Theory of Rents and Valuation of Subsoil Assets 18 Structure of Energy and Mineral Markets 21 Notes 33 Chapter 3 Institutional Framework 35 Mandates and Coordination 35 Role of the Sector Ministry 36 Roles of the Ministry of Finance and Revenue-Collecting Agencies 38 Role of the National Resource Company 40 Roles of Other Ministries and Government Agencies 42 Note 44 Contents vi Contents The Extractive Industries Sector • http://dx.doi.org/10.1596/978-1-4648-0492-2 Chapter 4 Investment and Production Cycles 45 Characteristics of Extractive Industry Investments 45 The Mining Cycle 45 The Oil and Gas Cycle 50 Chapter 5 Extractive Industries Policy 51 Policy and Regulatory Frameworks 51 Sector Financing, Ownership, and Liabilities 53 Mineral Legislation, Regulation, and Contracting Regimes 56 Establishing and Maintaining a Geodata Information Base 59 Mineral Rights Cadastre 61 Overview of Extractive Industries Tax and Royalty Regimes 62 Enhancing Competitiveness and Productivity 67 Note 69 Chapter 6 Monitoring and Enforcing Contracts: Legal Obligations and Institutional Responsibilities 71 Legal and Contractual Regimes 71 Building Transparency and Accountability in Contract and Revenue Management 73 Monitoring and Enforcing Fiscal Regimes for the Extractive Sector 74 Environmental Safeguards: Financial Sureties for Decommissioning 78 Social Safeguards: Community Foundations, Trusts, and Funds 82 Chapter 7 Public Infrastructure and Investment 87 From Subsoil Assets to Above-Ground Investment 87 Infrastructure Investment 89 Chapter 8 Economic Diversification and Local Content Development 93 Developing Linkages 93 Appendix A Resource Classification Frameworks 99 The Four Classification Codes 99 Committee for Mineral Reserves International Reporting Standards (CRIRSCO) 99 The Society of Petroleum Engineers–Petroleum Resources Management System (SPE-PRMS) 102 United Nations Framework Classification for Fossil Energy and Mineral Reserves and Resources 2009 104 System of Environmental-Economic Accounting 2012 105 Contents vii The Extractive Industries Sector • http://dx.doi.org/10.1596/978-1-4648-0492-2 Appendix B Types of Economic Rents 109 Hotelling Rents, or User Costs 109 Ricardian Rents 110 Quasi-Rents 110 Appendix C Impact of Income Changes on Commodity Demand 113 How Does Demand for Commodities Adjust? 113 Notes 116 Appendix D Effective Resource Contract Enforcement: A Checklist of Guidelines 117 Why Use a Checklist? 117 Resource Revenue Collection 117 Resource Revenue Projections and Macrofiscal Planning 118 Management of Expenditure and Contingent Liabilities 119 References 121