Reimbursement to landowners in the exploration phase

Energy Transition

17 Apr

Reimbursement to landowners in the exploration phase

Original title: Ersättning i prospekteringsfasen

There are indications from e.g. Finland that an economic compensation for landowners during the exploration phase can simplify exploration activities. Therefore, exploration companies in Sweden raised the question that it may be valuable if landowners and other stakeholders receive compensation already in the exploration phase.

In this report, we investigate how Swedish exploration fees compare to those in Finland, Ireland, Western Australia and Ontario, whether a monetary compensation to landowners can be expected to smooth exploration activities for companies, and what adding an extra cost to the exploration phase may do to companies’ incentives to conduct exploration in Sweden.

The study was based on official data from the Mining Inspectorate and respective authorities in the other jurisdictions, analysis using the Copenhagen Economics Model Mine, plus multiple interviews with representatives from concerned authorities and organizations such as the Mining Inspectorate, Finnish Safety and Chemicals Agency, Boliden, Björkdalsgruvan, Jåhkågaska Sami village, the Reindeer Herders' Association in Finland, Norra Skogsägarna (group of private forest owners) and Sveaskog (government owned forest owner).

The main conclusions of our study are:

We find that costs related to exploration activities in Sweden are very low compared to the other countries, the exploration costs in Finland are about 19 times higher than in Sweden.
We find that monetary compensation to landowners most likely would not simplify exploration in Sweden. The main reason for this is that many of the stakeholders who are negatively affected by exploration activities only hold a usage right, and does not actually own the land in question. Instead, we suggest to encourage dialogue between companies and affected stakeholders.
Based on results from Copenhagen Economics Model Mine, we find that a small compensation to landowners would have limited impact on expected return, and therefore on incentives to conduct exploration in Sweden. The negative effect on expected returns from the additional cost, increase with the risk of a project failing or increasing cost of compensation.

The study is commissioned by the Geological Survey of Sweden.

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