This paper analyses issues in resource rent through a case study of the Canadian coal industry. A model of the coal industry is constructed to estimate the magnitude of rent and distribution of coal rent between government and industry over the 30-year period from 1970 to 2000. Disaggregation of results by coal sector shows that rent varied widely, with one sector generating substantial rent and other sectors incurring large losses. The pattern of development of the coal sector followed what can be termed a "rent dissipation cycle" in which the generation of rent in the profitable sector created excessively optimistic expectations that encouraged new entrants to dissipate rent by developing uneconomic capacity. The analysis also shows that the system used to collect rent was ineffective. The public owner collected only one-third of the rent on the profitable mines and collected royalty revenue from the unprofitable mines even though no rent was generated. The case study illustrates that improvements in private sector planning based on a better appreciation of resource market fundamentals, elimination of government subsidies that encourage uneconomic expansion and more effective rent collection are all needed to avoid rent dissipation and increase the benefits of energy development in producing jurisdictions. The study also illustrates that estimates of rent in the resource sector should disaggregate results by sector and make adjustments for market imperfections to accurately assess the magnitude of potential rent. (C) 2002 Elsevier Ltd. All rights reserved.