Government investment in mineral resource information on leasable public lands: The case of strippable coal

A scheme is presented to aid the government in estimating the net benefits, in terms of itsrecovery of expected rents, of performing various levels of exploration of mineral tracts prior to leasing and making such information available to potential bidders. Conditions are identified where the government will profit by investment in geologic data that are collected and provided to potential bidders without reducing the expected returns to bidders. Expected benefits of an optimal data-collection program depend on (1) the degree of bidder risk aversion, (2) the expected degree of lease competition and (3) unique lease tract factors that determine economic rents—thickness of seams, proximity to markets, extraction costs, and the spatial correlation characteristics of data. The effects of price uncertainty and government policies affecting market stability on the value of information are also discussed.