CONCEPTS

The availability of improved mineral and energy resources estimates, as well as updated guidance from the System of National Accounts 2008 (SNA 2008) and the System of Environmental-Economic Accounting 2012 (SEEA 2012) have enabled the ABS to develop direct indicators of the service flows of mineral and energy resources. Mineral and energy resources are defined in the SNA 2008 as:

"…those proven subsoil resources of coal, oil and natural gas, metallic minerals or non-metallic minerals that are economically exploitable given current technology and relative prices." (SNA 2008, para. 12.17)

The ABS has chosen the net present value (NPV) approach to value the stock of these assets as there are insufficient transactions in mineral and energy resources in Australia to determine market values. This method is one key approach recommended in SNA 2008 and the SEEA 2012. SNA 2008 notes that the NPV is derivable from economic rents accruing to miners. SNA 2008 states that:

"Suppose that a mining company knows the size of the deposit being mined, the average rate of extraction and the costs of extraction of one unit. After allowing for all intermediate costs, labour and the cost of fixed assets used, what is left must represent the economic rent of the natural resource. By applying this to the expected future extractions, a stream of future income can be estimated and from this, using the techniques already described, a figure for the value of the stock of the resource at any point in time." (SNA 2008, para. 20.47)

SEEA 2012 is a framework for developing statistics about natural resources and ecosystems. It is designed to provide an environmental context for economic decision making. Data produced in line with SEEA 2012 enables an assessment of the impact of economic decisions on the environment and the impact of environmental policies on social and economic development. SEEA 2012 adopts a range of conventions (residence, unit definitions, sector and industry classifications, statistical geography and accounting structure) that are shared with SNA 2008 to make it easier to relate data derived from both frameworks. An example is relating land, energy and water use to industrial production, employment, capital investment and income generation.

A basic principle of national accounting is equivalence of the valuation of transactions, assets and liabilities from different approaches. In principle, the value of a transaction can be equally well measured from the expenditure on a good or service as from the income generated by the transaction. By extension, it should be possible to value transactions involving the extraction of natural resources by measuring the operating surplus derived from the extraction or by measuring the service flows associated with the extraction.

SEEA 2012 further articulates how to attribute mining income to a mix of produced and non-produced assets used in the production process. SEEA 2012 shows that mining net operating surplus can be further decomposed into a return to non-produced assets (‘rents’ attributable to general government owners of the in situ resources), a return to produced assets (income retained by miners from rights to exploit minerals), and a measure of resource depletion (where depletion is analogous to consumption of fixed capital (COFC)). These accounting relationships are demonstrated in Table 1. The combination of the return to non-produced assets and depletion represent resource rents:

"Resource rent is thus derived from standard SNA measures of gross operating surplus by deducting specific subsidies, adding back specific taxes and deducting the user costs of produced assets (itself composed of consumption of fixed capital and the return to produced assets). As noted above, resource rent is composed of depletion and the net return to environmental assets." (footnote 1) (SEEA 2012, para. 5.120)

Gross operating surplus	Capital services of produced assets	Consumption of fixed capital	Consumption of fixed capital
		Return to produced assets	Economic rent
	Services of non-produced assets or resource rent	Return to non-produced assets
		Depletion	Depletion

Table 1 shows that the returns to produced and non-produced assets are the economic rent, and this will be estimated using price, cost and quantity extracted data.

Capital services are inputs to the owners of capital. For example, services from produced assets such as machinery and equipment and non-dwelling construction are allocated to the industry of ownership. The assets themselves may be either owned outright or through a finance lease type arrangement. When capital is rented, its services are recorded as an intermediate input of the lessee industry.

Mineral and energy resources are Crown owned on behalf of the community. That is, the government retains the ownership of the in situ deposits and the NPV is recorded on the general government balance sheet. Miners do not own the in situ mineral and energy resources. Rather they have acquired rights to extract minerals and pay rent to the government (in the form of royalties) for the deposits extracted.

It follows that to treat the services obtained by miners from mineral and energy resources consistently with the treatment for capital services requires the creation of a non-produced asset owned by miners that is separate from the resources themselves. While the SNA 2008 provides for a range of treatment options, there is no international consensus on the most appropriate treatment. One option is to create a 'permission to extract' asset for extractors. However, further research is required since it is unclear how to value the asset. Whether the value should reflect the cost of exploration, or royalties paid etc. needs to be determined. Therefore, the experimental mining productivity estimates to be introduced adopt the production function approach without satisfying the ownership principle.

A second issue relates to the treatment of depletion. Depletion needs to be allocated and recorded according to industry and sector of ownership, as is the case for consumption of fixed capital. Thus, depletion is similarly recorded in the ASNA general government accumulation accounts and balance sheets alongside the stock of mineral and energy resources. It is recorded in the other change in volume of assets account as the balance of additions less depletion. So while SEEA 2012 recommends depletion be recorded against the extractor (as illustrated in table 1), this is only possible if an asset owned by miners that is linked to the resources is recognised.


Footnote 1 In Australia, there are no significant specific subsidies or taxes attributable to the subsoil natural resources. So in Figure 1, specific taxes can be ignored. <back