BHP Billiton, Versus Papua New Guinea

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BHP Billiton, Versus Papua New Guinea

Australian mining firm BHP Billiton and Papua New Guinea’s government have gone to battle over the Ok Tedi Mine.

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.