This report reviews the various administrative systems by which governments may award the rights to explore for minerals and petroleum, and assesses the relative strengths and weaknesses of each approach. A brief outline of the legislative framework for mineral and petroleum exploration in Australia is provided, and published accounts of the application of various allocation systems both in Australia and overseas are reviewed.
An empirical analysis of patterns of exploration for coal, petroleum and other minerals in Queensland forms a major part of the work. The aim of this analysis is to determine how different allocation methods and administrative procedures have influenced patterns of resource exploration in this state.
Based on both theoretical considerations and empirical observations, the performance of each system is rated for different prospectivity and data availability scenarios, and for a wide range of policy objectives. It is concluded that no single approach can be recommended for all situations, and that political priorities will be a crucial factor in determining the choice of an allocation system.
Non-competitive allocation should be used in most areas of low prospectivity, and work program bidding in moderately prospective areas. The government should reserve the right to employ a cash bonus bidding system in areas where strong competition for exploration rights is expected. Land should be released for competitive bidding as a result of nominations by companies, but the government may reserve the right to withhold any nominated area. The right of renewal for authorities to prospect should be limited, and a retention licence introduced. An escalating annual rental, deductible from future royalty payments, would encourage relinquishment of areas with no real istic prospects for future development.