Depletion of Non-Renewable
Resources
Report on London Group outcomes
UNCEEA meeting, New York, July 2007
Peter Comisari
Gemma Van Halderen
Australian Bureau of Statistics
London Group, depletion and the
updated SEEA
London Group has commenced work on the
recommended treatment of depletion of nonrenewable natural resources within an updated
SEEA
Key fundamental decisions on two aspects of
depletion taken at the March 2007 London Group
meeting in Johannesburg
This session reports on the Johannesburg outcomes
SEEA-2003
Characterised by multiple treatment options for
some issues
If SEEA is to become an international statistical
standard, these ‘options’ must be reconstituted as
clear accounting recommendations
SEEA 2003 Chapter 10: sections
Depletion
Defensive
expenditure
Degradation
SEEA 2003 Depletion
Depletion:
Five sets of options
Two sets of options targeted for resolution at
March 2007 London Group meeting
Two issues for resolution
1.
How best to view resource rent associated with
the extraction of natural resources?
2.
How best to view the discovery of mineral and
energy resources ie subsoil assets?
i.e. what is the relationship between mineral
exploration and new discoveries of mineral
and energy resources (subsoil assets)?
Issue 1
How best to view resource rent associated with
the extraction of natural resources?
How to define the income
element of resource rent?
SEEA 2003 presented three options
A1. Entire resource rent = income
A2. No resource rent = income
A3. Resource rent = part income and part
depletion
London Group Recommendation:
A3 resource rent = part income, part
depletion
Option A1 implies that natural resources are infinitely
abundant – evidently not true for many resources.
Option A2 ignores often substantial income earned by
these industries – base for tax revenue etc.
Option A2 provides no indication of why owners invest
in extractive industries i.e. where is the economic
return to the owners?
A3 resource rent = part income, part
depletion, continued
Option A3 has resource rent split into: income and
depletion components
Recognizes that natural resources have greater
economic value when extracted – this additional value
is reflected as income associated with the extraction
process
A3 resource rent = part income, part
depletion, continued
SEEA is an integrated environmental and economic
accounting system
Extractive industries will not exist without an economic
return to the owners
As natural resource becomes scarcer, income share of
resource rent falls and depletion share increases -an appropriate message to policymakers
How to define the income
element of resource rent?
London group unanimously recommended
A1. Entire resource rent = income
A2. No resource rent = income
A3. Resource rent = part income and part
depletion
Second issues for resolution
How best to view the discovery of mineral and
energy resources ie subsoil assets?
i.e. what is the relationship between mineral
exploration and new discoveries of mineral
and energy resources (subsoil assets)?
How best to view discovery of
mineral energy resources?
B1. Use independent sources, neither based on
resource rent of the deposit, to separately value
mineral exploration and mineral resources
B2. Valuation of mineral deposit according to
NPV of resource rent, calculated to exclude value
of mineral exploration
B3. Same values as option B2, but combine
mineral exploration and mineral resource and
attribute to a ‘developed natural asset’
Option B1: use independent
sources, not linked to resource rent
of the deposit
generally: SNA requires market prices
mineral resources rarely sold on market, especially in
countries where they are owned by the government
and market values for mineral resources tend to reflect
combined value of mineral resources and associated
mineral exploration i.e. risk of double counting
Option B2: valuation of mineral
exploration according to NPV of
resource rent
SNA93 Rev.1 generally recommends market
values but suggests use of NPV where returns
are spread over lengthy periods (e.g. for mineral
resources)
NPV systematically links resource rent with values
of mineral resources and mineral exploration
-- value of mineral exploration excluded from
resource rent used to value the mineral resource
Option B3: mineral exploration
‘producing’ new discoveries of mineral
resources?
Implies mineral exploration somehow transform
inputs in order to ‘produce’ new discoveries?
not valid -- can mineral resources be thought of
as ‘produced’, in any sense?
Option B3: mineral exploration
‘producing’ new discoveries of mineral
resources? continued…
Output of mineral exploration = knowledge asset
(information about the mineral resource)
Value of this output is the price paid to the
exploration company
-- mineral exploration (knowledge) asset is used
in the subsequent extraction process
London Group rejected option B3:
instead, combined elements of
options B1 and B2…
Record the value of mineral exploration based on either
market prices or costs depending on whether it is
carried out by a contractor or on own account.
The value of the mineral deposit ie the subsoil asset
should be based on observed market value or, where
this is unavailable, on NPV of the resource rent. In
either case, the value of the mineral deposit should be
calculated to exclude the value of mineral exploration.
In summary,
London Group decisions and UNCEEA…
• London Group cognisant of UNCEEA’s
objectives, i.e.:
– ‘mainstreaming’ SEEA
– elevating SEEA to international statistical
standard
– advancing SEEA’s global implementation
London Group decisions and UNCEEA,
continued…
• Decisions on depletion are:
– consistent with 1993 SNA and draft
SNA93Rev.1
– consistent with long-term thinking within
London Group
– implementable within statistical agencies,
including developing countries…
London Group decisions and UNCEEA,
continued…
• London Group decisions on depletion were
unanimous
London Group decisions and UNCEEA
• Recommend UNCEEA endorse the outcomes
achieved by London Group
SEEA 2003 Revision Process
Issue 13 Recording of non renewable
natural resources
Issue
London Group
UNCEEA
13.1 Identifying income
element of resource rent
Unanimous agreement on
treatment
Endorsement sought July
2007
13.2 Mineral exploration
and mineral deposits
Unanimous agreement on
treatment
Endorsement sought July
2007
13.3 Additions to and
subtractions from stock of
environmental assets
For discussion next
London Group meeting
Seek endorsement July
2008
13.4 Ownership of
mineral-related assets
For discussion next
London Group meeting
Seek endorsement July
2008
13.5 Recording Depletion
For discussion next
London Group meeting
Seek endorsement July
2008