Other Resources

Victor, D. G., D. R. Hults, and M. Thurber. 2012. Oil and

Governance: State-Owned Enterprises and the World Energy

Supply. Cambridge, UK: Cambridge University Press.

OTHER RESOURCES

Summaries of the following references are available online at the Sourcebook website: World Bank. 2006. Mining Royalties: A Global Study of Their

Impact on Investors, Government and Civil Society.

A World Bank Study. Washington, DC: World Bank, chapter 2. Mansell, R. L., J. Winter, M. Krzepkowski, and M. C.

Moore. 2012. Size, Role and Performance in the Oil and

Gas Sector. Calgary, Canada: University of Calgary School of Public Policy.

CHAPTER 3: THE ExTRACTivE indusTRiEs 53

PART II

The Value Chain Approach to Extractives

Policy, Legal, and Contractual Framework Sector Organization and Regulatory Institutions Fiscal Design and Administration

Revenue Management and Distribution

Sustainable Development Implementation

Transparency and Accountability

INTRODUCTION TO PART II

Two key ideas were advanced in Part I of the Sourcebook. First, just as more governments face decisions as custodians of extractive resources, specialist knowledge about all aspects of the extractive industries (EIs) value chain has grown and become more readily accessible. This wealth of knowledge creates a challenge for states and other stakeholders who must use it in particular settings. The abundance and diversity of knowledge leaves ample room for interpretation of what constitutes “good international practice.” It can be difficult to know how the knowledge may best operate as a source of standards or quality benchmarks for policy decisions on legal and regulatory frameworks, sector organization, fiscal design, and revenue management.

The second idea is that, for many and perhaps most governments, responsibility for public policy decisions has become more sensitive than ever before, for three reasons. First, there is greater scrutiny of executive actions by legislatures, civil society, and individual citizens keen to ensure that decisions to promote resource-led development bring benefits to the ultimate owners, the country’s people. Second, there is a high level of awareness of negative outcomes that can result from extractives development at a macrolevel (the resource curse) and also of the failures that can result from some of the instruments and techniques used in development: contract provisions, methods of awarding rights, or the design and operation of resource funds, for example. Given that extractives are nonrenewable resources, wrong policy decisions about their use can be particularly damaging to a country. Third, as the links between extractives and development policy have become established, expectations of potentially wide economic and social benefits have grown. This creates new minimum requirements for sustainable public policies in the EI sector and new sources of strain and instability in relations between governments and foreign investors.

Part II of the Sourcebook focuses on areas of EI development where decisions involving policy choices are typically required and need to be justified by governments to their citizens. Through a critical review of the many country and regional case studies, elaborations of general principles,

published models, and recent research, it presents an updated version of internationally accepted “good practice” knowledge on four of the five key topics encapsulated by the EI Value Chain. The topics or problem complexes addressed in Part II are (1) the policy, legal, and contractual framework (chapter 4); sector organization and regulatory institutions (chapter 5); fiscal design and administration (chapter 6); and revenue management and distribution (chapter 7). The fifth topic—sustainable development implementation—is examined in Part III.

The interests of two broad kinds of state have shaped the Sourcebook’s analysis of the body of knowledge: (1) new or aspiring extractives producers and (2) existing producers engaged in or planning reforms of their oil, gas, or mining sectors. In each case, the state will have a keen interest in current international good practice in the EI Value Chain. The Sourcebook’s operating assumption is that the host state has decided to invite participants from the domestic or international sector to develop resources on its behalf and under its supervision, perhaps with a state company involved, rather than to develop the resources entirely by itself. For the new and aspiring producing countries the benefits of using nonstate parties to develop resources are likely to be many. For the second category, the invitation is likely to be of a need for specialized, high-tech equipment and skills not available in the state sector or for high levels of capital investment, or both. For this cooperation to be successful, it is necessary for both parties to make credible commitments intended to last over time. The establishment of a sound and enforceable legal and contractual framework is of fundamental importance in this process. This priority is reflected in the first two chapters of Part II.

Any modern approach to good practice is influenced by the three challenges to effective decision making identified in Part I: (1) the need to contextualize and adapt lessons from the body of specialist knowledge (good practice has to “fit”), the need to counter institutional weaknesses (good practice has to be capacity sensitive), and the need for the maximum transparency and accountability in governance arrangements (good practice has to be credible). Taken together, these challenges have contributed to a rethinking of good practice knowledge, rebalancing it so that it is much less reliant on investor-driven definitions than in the past.

Understanding good practice in this way, informed by twenty-first century development needs, should make the knowledge presented and analyzed in Part II practical for officials in various levels of government and stakeholders responsible for the scrutiny of public policy. In our view, responsibility in the EI sector should be understood in the widest sense, because extractive resources are ultimately owned in virtually all parts of the world by the people, not by governments.

56 OIL, GAS, AND MINING