ORIGINAL PAPER
The Aumann-Maschler bargaining set as a criterion for the division of mining royalty
1
AGH University of Science and Technology, Kraków
Submission date: 2023-11-13
Final revision date: 2023-12-20
Acceptance date: 2024-04-30
Publication date: 2024-06-24
Gospodarka Surowcami Mineralnymi – Mineral Resources Management 2024;40(2):143-161
KEYWORDS
TOPICS
Scientific background of mineral resource managementRational and efficient development and utilization of mineral resourcesEffective mineral deposits exploitationMineral policyEconomics of mineral industriesRational use of mineral raw materials
ABSTRACT
This article proposes an unconventional approach to the division of mining royalties between various administrative units affected by mining activities. Typically, a mining royalty is considered the own income of the units where the exploitation is performed and is usually calculated in relation to the tonnage (volume) of the extracted mineral or the value of the raw material produced. In the article, a different approach has been proposed in order to ensure a useful and fair division of the royalty wherein the unit levy calculation approach was combined with the income criterion using Aumann-Maschler bargaining sets. The case study of the Racibórz II-Reservoir 5 pebble deposit, located within three administrative units (districts) in southern Poland was considered. The exploitation of the deposit within each of the districts requires the separate consent of the local authorities, and in the analyzed case, it is currently conducted in two districts. In terms of income, achievable revenues from exploitation for various alliances of the districts that provide the deposit for mining were calculated. The feasible revenues were transformed into appropriate streams of the mining royalty distribution. It was pointed out that the solutions suggested by the Aumann-Maschler bargaining sets can be treated as a fair division. Proper royalty allocation can be an effective, flexible and important factor in encouraging the district authorities to consent to the exploitation. The adoption of solutions based on the Aumann-Maschler bargaining set will meet the requirement of the full use of mineral resources and is an example of externalities compensation resulting from mining activities.
ACKNOWLEDGEMENTS
The paper was prepared with the use of AGH University of Krakow research subsidy No. 16.16.140.315.
I would like to thank the reviewers for taking the necessary time and effort to review the manuscript. I sincerely appreciate all your comments and suggestions relating to the main body and conclusions of the paper as well as suggested text shortenings. I apologize for the shortcomings in the references list in the original version of the manuscript.
METADATA IN OTHER LANGUAGES:
Polish
Zbiór przetargowy Aumanna-Maschlera jako kryterium podziału opłaty eksploatacyjnej
gospodarka złożem, opłata eksploatacyjna, koalicja, zbiór przetargowy Aumanna-Maschlera
W artykule zaproponowano niekonwencjonalne podejście do podziału opłaty eksploatacyjnej pomiędzy różne jednostki administracyjne objęte działalnością wydobywczą. Zazwyczaj opłata eksploatacyjna jest dochodem własnym jednostek, gdzie prowadzona jest eksploatacja i wylicza się ją najczęściej w odniesieniu do tonażu (objętości) wydobytej kopaliny lub wartości wyprodukowanego surowca. W artykule, poszukując użytecznego i sprawiedliwego podziału tej daniny, połączono podejście naliczania opłaty jednostkowej z kryterium przychodowym, wykorzystując zbiory przetargowe Aumanna-Maschlera. Rozważono studium przypadku złoża kruszyw Racibórz II-zbiornik 5, położonego w południowej Polsce w obrębie trzech gmin. Eksploatacja złoża w obrębie każdej z gmin wymaga odrębnej zgody samorządu lokalnego, a w analizowanym przypadku prowadzona jest obecnie na terenie dwóch z nich. Skalkulowano, w ujęciu dochodowym, możliwe do osiągnięcia przychody z tytułu eksploatacji dla różnorodnych aliansów gmin aprobujących wydobycie. Możliwe do osiągnięcia przychody przekształcono w odpowiednie strumienie rozdziału opłaty eksploatacyjnej. Wskazano, że rozwiązania sugerowane zbiorami przetargowymi Aumanna-Maschlera umożliwiają elastyczne zarządzanie dystrybucją opłaty, a właściwa jej alokacja może być skutecznym i istotnym czynnikiem aktywizującym gminy do wyrażenia zgody na eksploatację. Zademonstrowano, że przyjęcie rozwiązań na bazie zbioru przetargowego Aumanna-Maschlera spełnia postulat racjonalizacji gospodarki złożem, umożliwiając kompletne i kompleksowe wykorzystanie zasobów, zapewniając przy okazji, podyktowany kryteriami rozwiązania, sprawiedliwy podział opłaty, jako kompensaty efektów zewnętrznych wynikających z wydobycia i całościowej działalności górniczej.
REFERENCES (69)
1.
Adelman, M.A. 1990. Mineral depletion with special reference to petroleum. The Review of Economics and Statistics 72(1), pp. 1–10, DOI: 10.2307/2109733.
2.
Aguilera et al. 2009 – Aguilera, R.F., Eggert, R.G., Lagos, G.C.C. and Tilton, J.E. 2009. Depletion and the future availability of petroleum resources. The Energy Journal 30(1), pp. 141–174, DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No1-6.
3.
Anderson, O.L. 1997a. Royalty valuation: should royalty obligations be determined intrinsically, theoretically, or realistically – part 1. Natural Resources Journal 37(3), pp. 547–610.
4.
Anderson, O.L. 1997b. Royalty valuation: should royalty obligations be determined intrinsically, theoretically, or realistically – part 2. Natural Resources Journal 37(3), pp. 611–693.
5.
Anderson, R.M. 1994. Convergence of the Aumann-Davis-Maschler and Geanakoplos bargaining sets. Working Paper No. 94–223. University Of California at Berkeley, California.
6.
Aumann, R.J. and Maschler, M. 1961. The bargaining set for cooperative games. Princeton University Econometric Research Program, Research Memorandum No. 6. Princeton, New Jersey.
7.
Bacarreza, G.C. and Humanez, N.M. 2014. Optimal royalty rate for coal mining in Colombia: an empirical analysis. MSc. thesis, Universidad EAFIT, Medellin, Colombia.
8.
Baunsgaard, T. 2001. A primer on mineral taxation. IMF Working Paper WP/01/139, International Monetary Fund, Washington.
9.
Boadway, R. and Flatters, F. 1993. The taxation of natural resources principles and policy issues. Working paper WPS 1210. Public Economics Division, Policy Research Department, World Bank, Washington.
10.
Brams, S. and Taylor, A. 1996. Fair division by auctions [In:] Brams, S. and Taylor, A., Fair Division: From Cake-Cutting to Dispute Resolution. Cambridge University Press, Cambridge, pp. 178–203.
11.
Calvo et al. 2017 – Calvo, G., Valero, Al. and Valero, A. 2017. Assessing maximum production peak and resource availability of non-fuel mineral resources: Analyzing the influence of extractable global resources. Resources, Conservation and Recycling 125, pp. 208–217, DOI: 10.1016/j.resconrec.2017.06.009.
12.
Castillo, E. and Eggert, R. 2020. Reconciling diverging views on mineral depletion: a modified cumulative availability curve applied to copper resources. Resources, Conservation and Recycling 161, DOI: 10.1016/j.resconrec.2020.104896.
13.
Chadha, R. and Kapoor, I. 2022. Mineral royalty rates. A policy review. CSEP Discussion Note-15, Centre for Social and Economic Progress, New Delhi.
14.
Corrick et al. 2020 – Corrick, L., Lassourd, T., Readhead, A. and Taquiri, T. 2020. Mining tax policy responses to COVID-19. IGF COVID-19 response series. IISD, International Institute for Sustainable Development, IGF Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, Ottawa.
15.
Cruz et al. 2021 – Cruz, T.L., Matlaba, V.J., Mota, J.A. and dos Santos, J.F. 2021. Measuring the social license to operate of the mining industry in an Amazonian town: A case study of Canaã dos Carajás, Brazil. Resources Policy 74, DOI: 10.1016/j.resourpol.2020.101892.
16.
Darvas, Z. and Martins, C. 2022. The impact of the Ukraine crisis on international trade. Working Paper 20/2022, Nomura Foundations Macro Economy Research Conference Bruegel Research Meeting, Tokyo.
17.
Dasgupta, P. and Heal, G. 1974. The optimal depletion of exhaustible resources. The Review of Economic Studies, 41, Symposium on the Economics of Exhaustible Resources, 3–28.
18.
Dasgupta, P. and Stiglitz, J. 1981. Resource depletion under technological uncertainty. Econometrics 49(1), pp. 85–104, DOI: 10.2307/1911128.
19.
Dubiński, J. 2013. Sustainable development of mining mineral resources. Journal of Sustainable Mining 12(1), pp. 1–6, DOI: 10.7424/jsm130102.
20.
Einy, E. and Wettstein, D. 1996. Equivalence between bargaining sets and the core in simple games. International Journal of Game Theory 25, pp. 65–71, DOI: 10.1007/BF01254385.
21.
Gajigo et al. 2012 – Gajigo, O., Mutambatsere, E. and Ndiaye, G. 2012. Royalty rates in African mining revisited: evidence from gold mining. AfDB Africa Economic Brief 3(6), pp. 1–12.
22.
Galos, K. and Smakowski, T. 1993. Proposal of modification of legal acts relating to royalties [In:] III Conference Actualities and Perspectives of Mineral Resources Management, November 17–19, Zakopane. CPPGSMiE PAN, Krakow, pp. 2-1–2-11 (in Polish with English abstract).
23.
Heaps, T. and Helliwell, J.F. 1985. The taxation of natural resources [In:] Auerbach, A.J., Feldstein, M. (Eds.), Handbook of public economics, volume I. Elsevier Science Publishers B. V. (North-Holland), Amsterdam, pp. 421–72.
24.
Heffron et al. 2021 – Heffron, R., Downes, L., Rodriguez, O.M.R. and McCauley, D. 2021. The emergence of the ‘social license to operate’ in the extractive industries? Resources Policy 74, DOI: 10.1016/j.resourpol.2018.09.012.
25.
Hein, J. and Cecot, C. 2016. Coal royalties. Historical uses and justifications. Institute for Policy Integrity, New York University School of Law. New York.
26.
Hein, J. and Cecot, C. 2017. Mineral royalties: historical uses and justifications. Duke Environmental Law & Policy Forum 28(1), pp. 1–29, DOI: 10.2139/ssrn.2918357.
27.
Henckens et al. 2016a – Henckens, M.L.C.M., Driessen, P.P.J., Ryngaert, C. and Worrell, E. 2016a. The set-up of an international agreement on the conservation and sustainable use of geologically scarce mineral resources. Resources Policy 49, pp. 92–101, DOI: 10.1016/j.resourpol.2016.04.010.
28.
Henckens et al. 2016b – Henckens, M.L.C.M., van Ierland, E.C., Driessen, P.P.J. and Worrell, E. 2016b. Mineral resources: Geological scarcity, market price trends, and future generations. Resources Policy 49, pp. 102–111, DOI: 10.1016/j.resourpol.2016.04.012.
29.
Höök, M. and Tang, X. 2013. Depletion of fossil fuels and anthropogenic climate change – A review. Energy Policy 52, pp. 797–809, DOI: 10.1016/j.enpol.2012.10.046.
30.
Hotelling, H. 1931. The economics of exhaustible resources. Journal of Political Economy 39(2), pp. 137–175, DOI: 10.1016/j.resourpol.2018.09.012.
31.
Kaźmierczak, U. 2015. Impact of rock mining on the income of the commune budgets. Górnictwo Odkrywkowe 56(1), pp. 36–42 (in Polish with English abstract).
32.
Kharitonova et al. 2013 – Kharitonova, M., Mikhailov, A. and Matsko, N. 2013. Influence of the time factor on the availability of deposits of nonferrous metals. Resources Policy 38(4), pp. 490–495, DOI: 10.1016/j.resourpol.2013.06.006.
33.
Komnitsas, K. 2020. Social license to operate in mining: present views and future trends. Resources 9(79), DOI: 10.3390/resources9060079.
34.
Luce, R.D. and Raiffa, H. 1989. Characteristic functions [In:] Luce, R.D., Raiffa, H., Games and decisions. Introduction and Critical Survey. Dover Publications, Inc., reprint, New York, pp. 180–198.
35.
Moffat et al. 2014 – Moffat, K. and Zhang, A. 2014. The paths to social licence to operate: An integrative model explaining community acceptance of mining. Resources Policy 39, pp. 61–70, DOI: 10.1016/j.resourpol.2012.04.002.
36.
Nash, J.F. 1950. The Bargaining Problem. Econometrics 18(2), pp. 155–162, DOI: 10.2307/1907266.
37.
Neyra, C.O. 2011. Mining taxation principles, tools and their application in Peru. Programa Gobernabilidad e Inclusion of the Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ) GmbH. San Isidro, Lima.
38.
Nikitina, N. 2014. Mineral resource dilemma: How to balance the interests of government, local communities and abiotic nature. International Journal of Environmental Research and Public Health 11, pp. 8632–8644, DOI: 10.3390/ijerph110908632.
39.
Northey et al. 2018 – Northey, S.A., Mudd, G.M. and Werner, T.T. 2018. Unresolved complexity in assessments of mineral resource depletion and availability. Natural Resources Research 27(2), pp. 241–255, DOI: 10.1007/s11053-017-9352-5.
40.
OECD 2011. The economic significance of natural resources: key points for reformers in Eastern Europe, Caucasus and Central Asia. Organisation For Economic Co-Operation And Development, Paris.
41.
Otto, J.M. 2001. Fiscal Decentralization and Mining Taxation. The World Bank Group Mining Department, Washington.
42.
Otto, J. 2018. The taxation of extractive industries: mining [In:] Addison, T., Roe, A. (eds.), Extractive industries: the management of resources as a driver of sustainable development, Oxford University Press, Oxford, pp. 275–297, DOI: 10.1093/oso/9780198817369.003.0014.
43.
Otto et al. 2006 – Otto, J., Andrews, C., Cawood, F., Doggett, M., Guj, P., Stermole, F., Stermole, J. and Tilton, J. 2006. Implications of royalties for investors, civil society, the market, and governments [In:] Mining royalties, a global study of their impact on investors, government, and civil society. The World Bank, Washington, pp. 183–238.
44.
Paredes, D. and Rivera, N.M. 2017. Mineral taxes and the local public goods provision in mining communities. Resources Policy 53, pp. 328–339, DOI: 10.1016/j.resourpol.2017.07.007.
45.
PGiG 2011. Geological and Mining Law. Journal of Laws of 2011, No. 163, item 981.
46.
PGI-NRI 2022. Mineral resources of Poland, as of December 31, 2021. Polish Geological Institute-National Research Institute, Warszawa (in Polish).
47.
Prior et al. 2012 – Prior, T., Giurco, D., Mudd, G., Mason, L. and Behrisch, J. 2012. Resource depletion, peak minerals and the implications for sustainable resource management. Global Environmental Change 22, pp. 577–587, DOI: 10.1016/j.gloenvcha2011.08.009.
48.
Prno, J. and Slocombe, D.S. 2012. Exploring the origins of ‘social license to operate’ in the mining sector: Perspectives from governance and sustainability theories. Resources Policy 37(3), pp. 346–357, DOI: 10.1016/j.resourpol.2012.04.002.
49.
Radwanek-Bąk, B. 2018. Problems of social acceptance of mining activities and ways of minimizing them in the EU countries. Biuletyn Państwowego Instytutu Geologicznego 472, pp. 185–192, DOI: 10.5604/01.3001.0012.7117 (in Polish with English abstract).
50.
Rapoport, A. 1970a. The bargaining set [In:] Rapaport, A., N-person Game Theory: Concepts and Applications. The University of Michigan Press, 1st edition. Ann Arbor, Michigan, pp. 114–124.
51.
Rapoport, A. 1970b. Three-level analysis of elementary games [In:] Rapaport, A., N-person Game Theory: Concepts and Applications. The University of Michigan Press, 1st edition. Ann Arbor, Michigan, pp. 68–86.
52.
Rubinstein, A. 1982 – Perfect Equilibrium in a Bargaining Model. Econometrica 50(1), pp. 97–109, DOI: 10.2307/1912531.
53.
Schmidt, M. 2019. Scarcity and environmental impact of mineral resources – an old and never-ending discussion. Resources 8(1), DOI: 10.3390/resources8010002.
54.
Scholz, R.W. and Wellmer, F.W. 2013. Approaching a dynamic view on the availability of mineral resources: What we may learn from the case of phosphorus? Global Environmental Change 23, pp. 11–27, DOI: 10.1016/j.gloenvcha.2012.10.013.
55.
Seifi, S. 2021. Resource depletion [In:] Crowther, D., Seifi, S. (eds), The Palgrave Handbook of Corporate Social Responsibility. Palgrave Macmillan, Cham., pp. 1105–1130, DOI: 10.1007/978-3-030-42465-7_14.
56.
Sekuła, A. 2010. Commune incomes from local charges. Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu-Research Papers of Wrocław University of Economics 101, pp. 272–280 (in Polish with English abstract).
57.
Sorley, W.R. 1889. Mining royalties and their effect on the iron and coal trades. Journal of the Royal Statistical Society 52(1), pp. 60–98, DOI: 10.2307/2979364.
58.
Steen, B.A. 2006. Abiotic resource depletion. Different perceptions of the problem with mineral deposits. The International Journal of Life Cycle Assessment 11, pp. 49–54, DOI: 10.1065/lca2006.04.011.
59.
Szamałek, K. 2001. Study of the royalty in the management of mineral deposit. Wyd. Naukowe „Scholar”, Warszawa. (in Polish).
60.
Szamałek, K. 2005. The analysis of the new royalty system. Przegląd Geologiczny 53(4), pp. 311–319 (in Polish with English abstract).
61.
Śleszyński et al. 2021 – Śleszyński, P., Nowak, M., Sudra, P., Załęczna, M. and Blaszke, M. 2021. Economic Consequences of Adopting Local Spatial Development Plans for the Spatial Management System: The Case of Poland. Land. 10, DOI: 10.3390/ land 10020112.
62.
Tchantcho et al. 2012 – Tchantcho, H., Moyouwou, I. and Andjiga, N.G. 2012. On the bargaining set of three-player games. Economics Bulletin 32(1), pp. 429–436.
63.
Thomas, L.C. 2003. N-person games [In:] Thomas, L.C., Games, Theory and Applications. Slightly corrected, unabridged republication of the 1986 edition. Dover Publications, Inc. New York, pp. 85–111.
64.
Thomson, W. 1994. Cooperative models of bargaining [In:] Aumann, R.J., Hart, S. (eds.), Handbook of Game Theory, Volume 2, Elsevier Science B.V., Amsterdam, pp. 1238–1284.
65.
Tilton, J.E. 2004. Determining the optimal tax on mining. Natural Resources Forum – A United Nations Sustainable Developmnet Journal 28(2), pp. 144–149, DOI: 10.1111/j.1477-8947.2004.00081.x.
66.
Tilton et al. 2018 – Tilton, J.E., Crowson, P.C.F., DeYoung Jr., J.H., Eggert, R.G. , Ericsson, M., Guzman, J.I., Humphreys, D., Lagos, G., Maxwell, P., Radetzki, M., Singer, D.A. and Wellmer, F.W. 2018. Public policy and future mineral supplies. Resources Policy 57, pp. 55-60, DOI: l0.1016/j.resourpol.2018.01.006.
67.
Tost et al. 2021 – Tost, M., Lesser, P., Poelzer, G., Akhouri, U. and Gugerell, K. 2021. Social licence to operate (SLO) guidelines for Europe. MIREU, Mining and Metallurgy Regions of EU. Brussels.
68.
Vincent et al. 1997 – Vincent, J.R., Panayotou, T. and Hartwick, J.M. 1997. Resource Depletion and Sustainability in Small Open Economies. Journal of Environmental Economics and Management 33, pp. 274–286, DOI: 10.1006/jeem.1997.0992.
69.
Yunis, J. and Aliakbari, E. 2022. Fraser Institute Annual Survey ofMining Companies 2021. Fraser Institute, Vancouver.
| eISSN: | 2299-2324 |
| ISSN: | 0860-0953 |
We process personal data collected when visiting the website. The function of obtaining information about users and their behavior is carried out by voluntarily entered information in forms and saving cookies in end devices. Data, including cookies, are used to provide services, improve the user experience and to analyze the traffic in accordance with the Privacy policy. Data are also collected and processed by Google Analytics tool (more).
You can change cookies settings in your browser. Restricted use of cookies in the browser configuration may affect some functionalities of the website.
You can change cookies settings in your browser. Restricted use of cookies in the browser configuration may affect some functionalities of the website.
