BHP Billiton, Versus Papua New Guinea
Image Credit: Wikicommons

BHP Billiton, Versus Papua New Guinea


From the halls of political power in Port Moresby to the corporate boardroom of BHP Billiton in Melbourne, a battle is emerging over the continued mining for copper and gold at the Ok Tedi Mine in Papua New Guinea’s far western Star Mountains.

PNG Prime Minister Peter O’Neill is warning his government might not extend the life of the mine, once licenses expire later this year, unless BHP agrees to some changes to the terms of ownership. O’Neill has also requested assurances over environmental safeguards.

Environmental issues plagued the project in the 1980s, and the Australian miner reported that mining operations had caused major environmental damage to the Fly River in 1999.

Ownership of the operation was then restructured with BHP’s 63.4 percent stake placed in the PNG Sustainable Development Program (PNGSDP).

The governments of PNG and Western Province hold the remainder of the balance in PNGSDP, a trust headed by economist Ross Garnaut. The trust effectively indemnified BHP Billiton against environmental damage while PNGSDP acted as the mine’s operator.

BHP took a step back from the operations while the fund amassed $1.4 billion to be set aside for the people of PNG. Garnaut said that this “was going to be certainly the largest act of corporate philanthropy”. Control of those funds has been cited as a core issue, although O’Neill has denied this.

Garnaut recently retired, and BHP’s practice of appointing three of the seven board members has ceased, giving room for the PNG government to have a larger say. This led to charges that BHP has not done enough to protect the environment and O’Neill has said he’s not convinced the mine is worth it.

He went so far as to say that BHP needed to shed its “colonial era” mentality.

The dispute has a familiar ring.

Mining has provided PNG with one of its few steady income streams. The Ok Tedi Mine contributed more than 25 percent to the government’s bottom line, while plans are well advanced for a massive expansion of the industry over the next two decades.

However, around the region the argument over environmental damage and the distribution of wealth from the mining industry – with little trickling down to those living in the immediate vicinity of a mine – has been heating up, particularly in Indonesia, Malaysia and The Philippines.

In PNG, there seems little to gain by pointing the finger.

O’Neill is well liked and his government is considered a breath of fresh air in light of the corruption and political infighting that plagued previous governments. Of equal importance, BHP is among the world’s largest miners, but it has also been a heavy promoter of sustainable development since the 1990s.

How these two resolve this dispute should become a focus for governments around the region who are obviously attracted to the wealth a mine can generate, but who also fear a voter backlash over environmental and wealth distribution issues.

Phillipa Carr
February 12, 2013 at 21:44

I don't really even know where to start with this article, as it contains some really strange inaccuracies. 

Firstly, WHO is PNGSTD? The mine operator is Ok Tedi Mining Limited, and always has been.  OTML is owned 36.6% by the State of PNG, with 18.8% of dividends going to Treasury, and the other 18.8% being divvied up between MROT#2 (FRPG) and Mineral Resources Star Mountains(mine area villages) (2 MRDC companies) and WPPDTA. I would say that there should be more contestation about where the MROT2 and WPPDTA are being spent than PNGSDPL funds, especially considering the lack of capacity in FRPG and WPA to get anything done!

Secondly, environmental impacts are well established, acknowledged, and compensated for in both the Restated Eighth Supplemental Agreement and Ninth Supplemental Agreements. I am well aware that people interested in Ok Tedi like to think that BHP is the big boogey man behind all the problems, but let us all remember that the National Government through legislation allowed the interim tailings scheme happen in the 1980s. The environmental damage was effectively allowed under the provisions of the supplemental agreements which relate to it. PNGSDP is a necessary "sovereign" fund, quarantining money for the future of the people of Western Province. The current environment situation has nothing to do with BHP anymore, it has everything to do with OTML. OTML through a variety of strategies trying to mitigate the downstream impacts – such as the mine waste tailings project and revegetation programs.

OTML continuing mining through the Mine Life Extension is going to happen - It has not gone through 4 years of community consultations, which have included representatives from Treasury, Finance, National Planning, MRA, DMPGM etc etc. Politicking won't derail it, because it would be cutting the nose off to spite the face. You say VOTER BACKLASH! there isn’t another PNG national election until 2017! Bob Danaya, fmr Governor of Western Province ran on a platform of “Fly River Provincial Government should own PNGSDP” and he won – but he lost in 2012 to Ati Wobiro, a former PNGSDP employee! How times change!

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