The new Henry-Review-inspired tender system for coal exploration permits, announced by Treasurer Fraser on Friday, is a clever, low cost way to raise much needed revenue to help fix the Queensland budget. The Mid Year Fiscal and Economic Review has a nice write up of this measure, which will raise around $220 million over the next few years:

Due to the tightly held nature of coal and petroleum (including coal seam gas) tenure and tenements, highly prospective areas are known to attract strong investor interest, for which the State receives no revenue. It is therefore proposed that a relatively small number of such prospective areas will be subject to a competitive cash bidding process. This is also in keeping with Recommendation 49 of the Henry Tax Review which recommended that “..state governments should consider using a cash bidding system to allocate exploration permits”

Of course, it may disadvantage small miners, as noted in the Brisbane Times this morning (Bligh angers lobby groups with $370m slug before election), but I doubt the economy as a whole will be worse off, as whoever gets the permits would have an incentive to make good use of them. Miners aren’t forced to bid more than they are willing to pay, and the tender will allow the State Government to capture some of the rents/super profits that mining can generate.

That said, one of the other budget measures affecting miners, the new duty on the transfer of exploration permits that will raise $100 million over the next few years, is less defensible on tax policy grounds. The resources sector lobby probably has good reasons to grumble about this measure.