4.16 - Public Policy And Mineral Law - Mineral Disposal Systems

This chapter will deal with the policy issues relating to mineral land disposal. The first portion of the chapter will discuss in general terms the legal systems utilized in disposing of mineral rights and the major problems encountered; the second section will comprise an analysis of the policy alternatives with emphasis on the pricing aspects. In this section, we are not attempting to provide a legal text, but simply to outline very briefly and sketchily the details of the systems. More detailed information can be obtained by contacting the appropriate governmental agency for specific information. Mining laws throughout the world are based on two major legal groupings: English Common Law and the Civil Law. These basic systems are often modified by Islamic Law and by negotiated -mixtures of these. Under English Common Law, which is embraced by the United States, Canada, and many of the members of the British Commonwealth of Nations, individuals can hold property and can extract minerals from it. The owner can dispose of minerals as he sees fit, either through contract, deed, or whatever other system is appropriate. CIVIL LAW Under Civil Law (also known as Regalian Law), mineral ownership is normally placed in the state, regardless of who owns the surface. This legal system applies in most European countries and their former colonies. It is derived from Roman law. The mineral deposits, thus, are worked under concessions. Most countries use a negotiated concession system and sometimes a combination of negotiation and competitive leasing. The negotiated system has advantages as well as disadvantages for both government and industry. In a system where the government administratively determines who is to get what, the concessions are normally large. Frequently they range up to several millions of acres and involve a considerable investment on the part of the concessionaire. There is no duplication of effort on the part of producers to obtain information, since a single concessionaire controls a given area. Consequently, less money is spent in toto because several prospective operators are not required to seek the same information. The system also has the advantage to the industry of permitting the concessionaire to select and retain the best producting area. Thus, major developmental expenditures are made on the production unit only, with a resulting reduction in the risk factor. The large initial size of the concession also minimizes the possibility of expending a large bonus payment for a barren property. The major governmental advantage of a concession is its flexibility in accomplishing other national objectives. For example, a lease could be negotiated at less than fair market value, but requiring substantial de-