Second guessing the Mining Act

By Phil Fitzpatrick*

EARLIER IN THE YEAR, Mines Minister Byron Chan peremptorily announced that the government planned to hand state-owned mineral rights back to traditional landowners.

Amid the uproar, prime minister Peter O’Neill managed to reassure the miners that this was not the case and apologised for the sudden dents in their shareholder’s wallets.

It was the first of several cases of government ministers jumping the gun.  Hopefully, after the last instance involving the Supreme Court, the message has got through and O’Neill’s stress levels have returned to normal.

There is no doubt that the Mining Act will either be rewritten or amended.  The current one goes back to 1992 and is not really up to dealing with the massive resource development and all the associated problems that are going on in Papua New Guinea at the moment.

If the Act is amended or re-written there are a number of key elements that need to be addressed.

Social mapping and landowner identification studies, just like those required under the Oil and Gas Act, need to be introduced. Under the latter Act preliminary studies are conducted before a company is allowed entry onto an exploration tenement and in detail if the project proceeds to the production stage.

These studies provide the company with an appreciation of the people in the area of a tenement and allow landowners to have an input into the exploration and development process.  At the moment the inconsistency between the two Acts simply serves to confuse people.

Despite the earlier announcement it is very unlikely that landowners will get ownership of the minerals under their land.  It is unfortunate that their expectations were unnecessarily raised but in reality the complications, legalities and inequities inherent in such a system are too great to be practical.

This doesn’t mean that there should not be provision for landholders to have greater equity in mining projects over and above any proportional royalties they might normally receive.

The way to do this would be to legislate so that they can negotiate deals over equity directly with the mining companies.  It would also be good if the provinces, and even local level government, could get a cut of that action too.

The money would still have to be controlled  through a trust arrangement but it would be a great way to get kinas out to the people.

Something should also be done to improve the process of dispute resolution between companies and landowners.  At the moment the companies are being accused of bully boy tactics and the landowners of making spurious claims.

Claims by fake landholders are also ruining what should really be a mutually beneficial two-way street.  A logical way of doing this might be to broaden the role of the Mining Warden.

The take-up of land for the purposes of mining is done on a leasehold basis from the state.  The conditions for the return of rehabilitated land to the traditional landowners once a mining project runs its course should also be clarified in the Act.

Peter O’Neill has embarked on a campaign to tackle political and bureaucratic corruption. It would be useful if the Act reflected this in some way; possibly legislating so that people in public office, including their immediate families, involved in dealing with mining projects are not allowed to derive any financial benefit from insider knowledge or through bribery would be good.

This should be extended for some time beyond the life of both the project and/or the person’s tenure in their position.

Offshore mining, of the sort envisaged by Nautilus and other companies needs to be incorporated in the Act.  Issues like the disposal of tailings will need to be addressed, either in the Mining Act or through a related Act.

The logical way to do this would be to extend the way in which Environment Impact Studies are conducted prior to the development stage.

There probably also needs to be some re-jigging and streamlining of the way royalty payments are calculated and paid.  At the moment payments are made following a serious of regular production reports submitted by the companies.  Quite often these are disputed.

A simpler method must be possible.  Perhaps the companies could make royalty payments based on their own internal book keeping. Inspection and appeal provisions would keep everyone honest and it would take a big load off the government.

Finally, the maximum equity available to the state in a mining development needs to be fixed.  At the moment it is more or less negotiable and, as has been clearly demonstrated, the government is short of skilled negotiators.  A rate in the 25 – 35% range would seem appropriate.

When and if any of this might happen is anyone’s guess but it is an urgent issue and sometime before or immediately after the next election would be ideal.

The next cab off the rank could be the 1992 Forestry Act.

* spotted on PNG Attitude


1 Comment

Filed under Corruption, Environmental impact, Financial returns, Human rights, Papua New Guinea

One response to “Second guessing the Mining Act

  1. John Wesely Phillips

    Indochine Mining (Mt Kare) beat you to the punch.
    Mining Act or no Mining Act they have imple,mented these obviously needed initiatives.

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