EDITORIAL PAGE — PNG in legal spotlight

It is unusual for a major deposit to go from discovery to production without attracting a lawsuit, and this phenomenon is not confined to North America.

An Australian law firm recently launched proceedings against the owners of the Ok Tedi copper-gold mine on behalf of a small group of landowners from Papua New Guinea (PNG). The claim is for unquantified environmental damages, not A$4 billion as widely reported.

The dispute is attracting attention in Australia, where the case is being heard, and in PNG, where the mine is situated. It is another sobering reminder that while PNG’s mineral potential is among the best in the world, operating a mine there is not for the faint-hearted.

The PNG government, which owns 30% of the mine, is taking the matter seriously. Prime Minister Paias Wingti has expressed concern that a foreign court’s decision could have consequences in PNG and that a foreign law firm could benefit substantially from its ruling.

The issue of investor confidence has also come to the forefront, and with it the realization by government that a mechanism is needed to help resolve disputes between landowners and resource companies. One of the ideas being considered is a compensation tribunal that would balance the needs of PNG landowners with the national interest.

In the meantime, however, preliminary hearings in the Ok Tedi suit have started in Australia. BHP Minerals, 52% owner (after a restructuring), intends to defend the action “vigorously,” though it will not deny the mine has had an impact on the environment. One of its defences will be that discharge into the river system was determined by the PNG government some years ago as the best available option for dealing with tailings. A landslide destroyed the original dam during construction, and it was later deemed impracticable to build a dam in the wet, seismically unstable and rugged region. An interim system was put into place whereby tailings find their way into a river system already carrying a significant natural sediment load. Although the impact on the river is believed to be reversible, compensation payments have been made to landowners.

On the other hand, the operation provides many tangible benefits. Of the 1,850 direct employees, 88% are from PNG. More than 10,000 people have benefited from improved health services. Indeed, since operations began 10 years ago, infant mortality has fallen to 3% from 33%, longevity has increased to more than 50 years from an average 30 years, and the incidence of malaria among children has dropped to less than 15% from 70%. More than US$300 million was spent on infrastructure, to remain after closure. This includes townsites, roads, power stations, education and health facilities, water systems and communications. A development trust was set up to bring benefits to communities along the river system. More than US$10.2 million was provided for projects to aid 102 villages, and the total will rise to US$80 million during the mine life.

PNG’s mining industry is at a crossroads. By most accounts, the current government is making efforts to resolve problems, and setting up a tribunal to deal with landowner disputes may be a good first step. If progress is made to address these and other concerns, Bougainville will be a distant memory and PNG could be the place to be for mining in the next century.