Allocation of Rights

Allocation of mineral rights is a significant issue in natural resource management, and illustrates a fundamental difference between extractive industries and other sectors of the economy. Specifically, soil ownership does not entitle one to mineral rights (though there are some countries with exceptions to this). Mineral rights often belong to the government. Ownership of the geological information also poses a significant issue in asymmetrical knowledge (e.g. industry holding more information than government) and can result in lack of understanding about the true wealth of mineral resources, and thus skewed negotiations or contracting. Six principles are conducive to a good allocation of mineral rights: predictability, discretionary allocation, nondiscrimination, security, transparency, and disclosure of information. The three main modalities of mineral rights allocation are: direct negotiation, auctions, and the most popular in the industry first come, first served. The pros and cons of these approaches are also profiled.

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