Tag Archives: Rio Tinto

IS BOUGAINVILLE ON THE BRINK OF WAR?

MOST OF THE NEWS COMING OUT OF PAPUA NEW GUINEA TODAY IS ABOUT THE REFUGEE CRISIS ON MANUS ISLAND. BUT 1,000KM SOUTHEAST OF MANUS ON BOUGAINVILLE ISLAND, A LITTLE-KNOWN STORY ABOUT THE BLOOD-SOAKED 40-YEAR-LONG INDEPENDENCE STRUGGLE OF A QUARTER OF A MILLION PEOPLE IS APPROACHING AN ENDGAME.

Ian Lloyd Neubauer | Penthouse | 13 July 2018

Cut from the pages of a glossy travel brochure and just smaller than Hawaii’s Big Island, Bougainville is blessed with incredible natural resources: sugar-white beaches, fisheries, hyper-fertile soil and one of the largest untapped mineral deposits on the planet – copper, silver, gold and uranium estimated to be worth hundreds of billions of dollars.

The largest known concentration of minerals lies in Panguna Mine, a vast hole in the ground in the Guava Mountains of central Bougainville. Between 1972 and 1989 it provided nearly half of PNG’s GDP and made billions in profit for its operator, Bougainville Copper Limited (BCL), a former subsidiary of Rio Tinto.

But while less than one per cent of those profits were reinvested in Bougainville, hundreds of millions of tonnes of tailings – the toxic by-product of industrial mining – were dumped straight into rivers, turning vast tracts of once-fertile farming and hunting grounds into barren, moonlike wastelands.

In the late 1970s, a landowner group led by Francis Ona presented BCL with a multi-billion dollar cleaning bill. BCL, however, claimed it was in compliance with the law while concurrently insisting it had not damaged the environment. It continued to dump tailings into the rivers like a careless tourist might drop a cigarette butt on the beach.

In 1988, push finally came to shove. Ona and his mob broke into BCL’s storerooms, stole a bunch of explosives and blew up Panguna’s power lines. The event marked the start of the longest conflict in the South Pacific since WWII and the world’s first successful eco-revolution – an episode of military history that has drawn parallels with the 2009 James Cameron film Avatar.

PNG sent in its army to crush the rebels, pitting Australian-supplied helicopter gunships and gunboats against a ragtag militia armed with slingshots and homemade rifles. When that failed, soldiers trained their sights on the general population, burning down villages, using rape as a weapon and executing alleged collaborators en masse. And when that failed PNG applied a cruel Australian-backed naval blockade, depriving the entire island of fuel, medicine and all contact with the outside world.

By the time a lasting peace agreement was signed in 2001, 15,000 to 20,000 Bougainvilleans – 10 per cent of the population – had been killed or succumbed to illnesses. For its woes, Bougainville was granted autonomy and tacit control of its fantastic mineral wealth, including the US$50 billion worth of copper and gold left at Panguna.

Now, a new-look independently listed BCL is plotting its return to Panguna, promising jobs and prosperity for all – despite not lifting a finger to clean the mess it left behind. Astonishingly, the Autonomous Government of Bougainville is courting the proposal because it desperately needs cash for an independence referendum scheduled for June 2019 and the prospect of running the world’s newest country the following year. But many Bougainvilleans hold serious grudges against BCL and warn if the company returns, war will follow.

HAPPY VALLEY

During the ’good times’ of the 1970s and 1980s, Arawa and its port Kieta, an hour’s drive from Panguna, was the second richest town in PNG. Hotels, restaurants and banks lined Happy Valley, Kieta’s dreamy beachfront strip, while cruise boats and sail craft crowded around the old yacht club.

All that remains of Kieta today are ruins overgrown with jungle and the wrecks of two small steamships at the end of a pier where Queen Elizabeth II and her royal entourage disembarked during a state visit in 1974. Arawa hasn’t fared much better; its wide boulevards lined with overgrown fields, stain-coloured apartment blocks and abandoned gas stations.

In Arawa I meet Philip Miriori, former private cabinet secretary of rebel leader Francis Ona, who died in 2005. Today Miriori is chairman of the Special Mine Lease Osikaiyang Landowners Association (SMLOLA), a group of 2,000-odd landowners who under the new Bougainville Mining Act hold rights not only to the topsoil but also the minerals underground. That makes Miriori one of the most powerful men in Bougainville and his opinion of BCL a matter of concern.

“BCL does not have any compassionate feelings. I have seen what they are capable of,” he says. “One night during the war, the PNGDF (PNG Defence Force) woke up everyone in my village and made us stand in a line while they burnt all our houses. I hold BCL directly accountable for what happened that night because BCL provided the soldiers with funding, logistics and shelter. Not as long as I am alive will I ever accept BCL coming back.”

Allegations of BCL’s complicity in Bougainville’s war stem back decades and have been corroborated by the highest level of government. In 2011, SBS’s Dateline unearthed an affidavit signed by former PNG Prime Minister Michael Somare that reads: “Because of Rio Tinto’s financial influence in PNG, the company controlled the government.” In a separate affidavit, former PNGDF general Jerry Singirok said the army “functioned as the corporation’s personal security force and were ordered by BCL to take action to reopen the mine – by any means necessary”.

BCL refused to comment for this story. But in a shareholder update released in October, the company claims it “has always maintained positive relationships in Bougainville” and “continues to respectfully build relationships with a range of stakeholders, including project area landowners”.

Yet in the very same document, the company scolds Miriori for “attack[ing] BCL through the media by using the title of SMLOLA chairman to convey the misleading impression that there is a united view of opposition to BCL”.

The notice also refers to a SMLOLA leadership dispute between Miriori and his cousin Lawrence Daveona, whose relationship with BCL stems back decades. Daveona was once president of the Bougainville Development Corporation, a purported BCL development fund that was run like a Fortune 500 company with interests in engineering, logistics and even mining. He was also a former director and secretary of BCL’s Roads Mine Tailings Lease Trust Fund – a body set up to administer compensation payments to Panguna landowners.

Daveona refused comment, citing ongoing court proceedings with Miriori. But he pointed out Miriori has a corporate sponsor of his own: RTG Mining, a Perth-based consortium that operates seven mines in five countries and is challenging BCL’s bid to reboot Panguna.

Miriori acknowledges he’s on RTG’s payroll but says his support for the company is based the award-winning environmental and social policies it has demonstrated at Masbate, the largest operating gold mine in the Philippines. “RTG will work well with the community,” he opines, adding: “If this story doesn’t go well, you will not be welcome back in Bougainville.

LEGACY PIT

In BCL’s October shareholder notice the company claims it is “increasing its presence in central Bougainville through the engagement activities of our local team”. 

Yet BCL has no official presence in Arawa. And it’s hard to imagine how a car with BCL logos could get past Alex Dakamari, a crusty old rebel with hangdog features who controls Morgan’s Crossing Checkpoint – a roadblock set up by Ona in the early 1990s on the only carriageway leading up to the mine.

“BCL are wasting their time. If they come back, we will fight,” Dakamari scowls. “We don’t want the mine reopened – full stop! Otherwise, all our money will go to white people like in the past. We were the owners and they turned us into beggars. They can’t get away with it again!”

Before it closed, Panguna was the largest open-cut mine in the world – 2.5 kilometres wide and half a kilometre deep. On one side of this titanic-size eyesore, a wall of untreated tailings hundreds of metres high marches slowly down a ravine. Millions of litres of opal-blue water rush from pit water drains on either side of this wall, forming waterfalls of the damned that lay waste to all life in the valley far below.

Dapera is a village that once sat right on top of the mine. In the early 1970s, BCL moved Dapera’s residents to a squatter settlement built on a plateau of crushed rock not far from the ore-sorting plant. A desolate collection of hardscrabble shacks, Dapera II is now home to a few hundred impoverished landowner descendants like Jayden Frankie.

“You can see the destruction BCL did to this community,” he says. “Before my father had good land. This is not good land. We can’t grow crops and when heavy rain falls, rocks in the ground turn blue and green.”

His friend, Richard Onio, voices similar sentiments. To find good land for farming we have to walk up to those hills,” he says, pointing to a steep ridge. “But it’s dangerous in heavy rains because of landslides.”

What do they think about the idea of a BCL comeback?

“They would not be welcome,” says villager Freddy Bernora. “We would send them off. They stole billions of dollars from us and I do not see how this company has changed.”

Frankie says he wants RTG to reopen the mine:

“We have seen some pictures of how RTG works in the Philippines, how people there live side-by-side with mining. They showed us how they produce benefits for landowners. They seem to respect landowners.”

“For me,” says Onio, “I am with neither RTG or BCL. I am neutral. I want to see if they meet our terms and conditions. I am not convinced by either side yet.”

CAESAR’S PALACE

On another plateau above the pit lies a small city where BCL housed more than 2,000 employees during the ’good times’. Today, around 8,000 landowners and squatters reside in the concrete skeletons of residential towers Ona and his mob set fire to after BCL withdrew. Masked in heavy fog, carpeted in moss and spattered with graffiti, it has the look and feel of a set from the Planet of the Apes.

Philip Takaung, Ona’s 77-year-old half-brother and Miriori’s deputy, is Caesar of this post-apocalyptic world. With the frame of a silverback gorilla and a crushing handshake to match, he makes an intimidating presence when I find him congregated with family and friends on the top floor of the tallest tower.

“When BCL came here and started polluting our land, we didn’t know anything about minerals. We had no education so they took advantage of us,” he says. “When we asked them to clean up the rivers, they did a feasibility study and said there was nothing poisonous in the water. We said NO! Our crops, our rivers, everything is dead! But they ignored us. They ignored us for 10 years until we took action. I was on that team with Ona that blew up the power lines.”

Takaung shows me his weapon of choice during the conflict: a nine-foot-long pole with a Y-shaped head known as the ‘Rambo Stick’ – a slingshot so powerful it can puncture a hole in a car, or take off somebody’s head. “This weapon is very good because it makes very little noise,” he says. “When you fire it, the enemy has no idea where you are. Then you can fire again.

I ask Takaung how many soldiers he killed during the war. He looks at two small children in the room who are glued to his every word, decides against answering and continues with his sermon:

“BCL burnt our villages. They tortured our people. They cut off people’s hands and threw them from helicopters. They raped our women, the young children, the men and old ladies! They put the machete in between women’s legs! I saw it! They slaughtered people like they were animals!”

On the way back to Arawa I stop at Anewa Bay, home to Bougainville’s modern port facilities.. There I meet port worker Francis Baubake, a withered old man in his fifties with a wooden leg and a terrible story to tell.

“In 1996, the PNGDF got a new mortar bomb that was untested. So they tested it on my family, “ he says. “We were in church in a refugee camp in Buin in the south when it hit us. My daughters Brenda and Alvina, seven and 12, and my wife Sicilia were instantly killed. I lost my leg,” he says, tapping his wooden stump.

I ask Baubake who he holds accountable for his loss. He stares numbly into the middle distance and thinks for a while before mumbling: “The PNGDF. The PNGDF and BCL.”

But when I ask what might happen if BCL returns to Bougainville, he answers without pause. “War,” he says, grinding his teeth. “War.”

THE NO-MINING VOTE

On my fourth day in Bougainville, I am struck with malaria and spend the next 24 hours shivering in bed, my joints and lower back burning with pain. The fever dissipates the next day but the experience makes me ponder the fate of an estimated 5,000 Bougainvilleans who succumbed to malaria during the blockade of the 1990s, and the poor state of health of most islanders today. In a squatter settlement next to my guesthouse, I find a man in his twenties with a cancer the size of a football growing from his heel.

More than half of all adults here are obese, while alcoholism is endemic. 

The war took everything out of everybody here and the trauma has been passed onto this generation,” says Geoff McAndrews, a Californian who recently opened Bougainville’s first surf camp. “There are no jobs. The only thing they have for entertainment is volleyball and homebrew.”

Over the next few days, I learn a significant minority are pro-BCL. “If BCL comes back, they can fix the environmental issues because they know all about them,” says accountant Lindsay Kalio. “I don’t think any other company can do this as we have no relationship with them.

Yet more than half of all islanders I speak to oppose any kind of industrial mining.

Our previous experience with mining was pollution and violence so I don’t want mining to come back,” says Alex Takena, a fisherman in Kieta. “We should focus on sustainable industries like copra (coconut) and cocoa farming.”

Lawrence Robert, a carpenter in Arawa, agrees. “I don’t think Panguna should reopen because our island is tiny and if miners come back, they’ll tear it to pieces. We should have tourism instead to promote our culture and heritage.”

Adds John Boscoe, a subsistence farmer from Oemah village in the island’s south: “Mining did not benefit any of us in in the past but we all lost our homes. If it happens again, the Panguna landowners will drink milk and honey and we will get nothing.”

The SMLOLA discounts anti-mining sentiment. “These people have to look at the bigger picture,” Miriori says. “Mining is the right choice for Bougainville because we need the revenue if we want to become an independent nation and generate employment and security. Panguna will reopen, whether they like it or not.”

BETTER THE DEVIL YOU OWN

A week passes until I regain enough strength to make the bone-jarring four-hour drive from Arawa to the capital Buka, which is as fly-blown as a place can possibly be.

When I arrive the city has been under a total electricity blackout for close to a week for reasons no one can explain. When I visit Bougainville’s House of Representatives in the middle of the day to make an appointment with President John Monis, no one is there. Ditto at the Ministry for Mineral and Energy Resources and BCL’s little office.

Later in the day, news breaks that the SMLOLA leadership dispute has ended and Miriori has emerged victorious. It sees RTG’s share price soar 83 per cent in a single day and the inking of a “historic” deal between the consortium and the SMLOLA.

“The Chairman and Mr Daveona have also pledged support for RTG as the preferred development partner,” RTG says in a statement. “This is a historic and important step for the landowners, with RTG being the first mining company that has been endorsed by the SMLOLA in 30 years.”

But the victory is short-lived. Bougainville Minister for Minerals and Energy Raymond Masono accuses RTG of trying to sneak into Panguna through the back door. “The Autonomous Bougainville Government rejects companies that think they can bribe their way into people’s resources by giving certain individuals money to gain landowner consent,” he says.

RTG rigorously denies it has bribed landowners even though Miriori admitted to me that he is on their payroll. However BCL has been busy handing out money to landowners, too.

In March of last year, BCL distributed US$1.5 million in compensation to landowners at a public ceremony in Buka attended by Masono. “It is not the devil that we used to know, but it’s now the devil that we own,” Masono said at the ceremony, adding that it would be foolish go out looking for other developers.

Masono’s comment about “the devil that we own” refers to Rio Tinto’s June 2016 decision to finally call it quits on Bougainville – and its subsequent donation of its majority shareholdings in BCL to the governments of Bougainville and PNG.

RTG chairman Michael Carrick says the move was in part an attempt by Rio Tinto to stack the deck in BCL’s favour. But the cards had already been stacked in a very big way by the authors of the 2015 Bougainville Mining Act, who gave BCL the first right of refusal to redevelop Panguna.

RTG’s Carrick insists the Act no longer applies. “BCL ’claims’ it has first right to the exploration license under the mining act,” he says. “But our legal advice is that the renewal application for extension of the term of their licence is invalid because it was submitted out of time and was incomplete.”

For his part Masono remains nonplussed, insisting BCL is still in the box seat and RTG doesn’t even have a seat on the table. “Right now, the only legal applicant on the exploration tenement is BCL,” he says. “Until that process is completed, there are no other applicants or applications over the same tenement. That’s the position of the government.”

THE PRESIDENT SPEAKS

On my last day in Bougainville, I score an interview with President John Momis at Buka’s tin-pot airport. Right from the get-go he contradicts Masono’s position and corresponding claims by BCL that its proposal has the support of the Autonomous Government of Bougainville.

“Currently we do not have a preferred partner. We will ask people who are interested to submit their applications and we will scrutinise their applications quite stringently,” the President says. “We are open to discussions with BCL but there’s whole new dimension today. They need to win the support of landowners who own the resources.”

I ask him what he thinks about RTG’s competing bid to redevelop Panguna, and of rumours that China is eyeing the mine.

“We are not sure about RTG,” he says. “They have to convince us first. I don’t know if they are in a strong position. As for the Chinese, they are not in the picture right now. But we are open for business.” 

And so the race for Panguna’s riches continues with no clear frontrunner. But no matter which company wins, three things seem certain.

First, the bulk of Panguna’s riches will inevitably end up in the pockets of oligarchs, shareholders and hopelessly corrupt officials instead of a sovereign wealth fund where it belongs. This prediction is drawn from the ’resource curse’, which dictates countries with lots of minerals tend to have less economic growth and democracy than countries with fewer natural resources. Hundreds of studies have been undertaken to prove the theory, though one need look no further to Hela Province on PNG’s mainland to see it happening in real time. There, ExxonMobil’s A$24 billion Liquefied Natural Gas (LNG) project has failed to deliver any significant development outcomes for landowners. “In fact, it has, in important ways, made life worse for the majority of people living in the project area,” says Michael Main, an Australian National University doctoral student conducting fieldwork in the area.

Which leads to prediction number two: if Panguna reopens, there will be blood. According to the World Bank study ‘Natural Resources and Violent Conflict’, countries that export around five per cent of GDP have a six per cent risk of conflict. But when exports reach 25 per cent of GDP, the probability of conflict climbs to 33 per cent. If Panguna reopens, exports of minerals will account for close to 100 per cent of Bougainville’s GDP. That doesn’t bode well under the World Bank’s formula. And despite reassuring me the plans to reboot Panguna’s will definitely go ahead, a fortnight after I leave Bougainville he changes his mind, announcing an indefinite moratorium.

We will not allow this project once again to reignite the wounds of the Bougainville crisis and distract our focus for restoring peace and our preparation for our referendum in 2019,” he told New Zealand’s Asia Pacific Report.

The decision is a breath of fresh air and a rare example of a politician in PNG making an unpopular and unprofitable decision that is beyond a shadow of a doubt in the best interest of constituents.

My final prediction for Bougainville? That the people will overwhelmingly vote in favour of self-determination when they go to the polls in 2019. “We in Bougainville have a huge passionate ambition,” Monis told me before I left, mirroring the thoughts of every Bougainvillean I interviewed on the subject. “And that ambition is to liberate ourselves from all kinds of transgressors, evil and marginalisation so there will be unity to affect the kind of changes we need to truly become free.” 

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Indonesia government asked to recalculate Freeport mine damage

FILE PHOTO: Trucks operate in the open-pit mine of PT Freeport’s Grasberg copper and gold mine complex near Timika, in the eastern region of Papua, Indonesia on September 19, 2015 in this photo taken by Antara Foto. REUTERS/Muhammad Adimaja/Antara Foto/File Photo

Reuters | 26 July, 2018

Indonesia’s parliament has asked the government to recalculate damage to the environment from the giant Grasberg copper mine operated by the local unit of Freeport McMoRan Inc, the environment ministry said.

A 2017 report by Indonesia’s Supreme Audit Agency (BPK) calculated that Freeport’s decades-long operations at the mine in Indonesia’s remote easternmost province of Papua had caused environmental damage worth $13.25 billion.

That damage, it said, was largely a result of tailings from the mine that had extended beyond previously agreed limits and which had polluted coastal areas.

The audit also said Freeport Indonesia (PT FI) had missed royalty payments, cleared thousands of hectares of protected forest and began mining underground without environmental clearance.

The environmental issues have presented problems for Freeport and Indonesia, whose state-owned mining holding company, PT Inalum, hopes to finalize a $3.9 billion deal to acquire a majority stake in Grasberg this year.

In a meeting with Environment Minister Siti Nurbaya on Tuesday, parliament urged the minister to “ensure that PT FI fulfils governmental administrative penalties” in accordance with the law, the ministry said in a statement late on Tuesday.

“Commission VII asks the Environment Minister to calculate the value of environmental losses resulting from damage and pollution from PT FI operations, as per the findings of the BPK,” Commission VII chairman Gus Irawan Pasaribu said, according to the statement.

Jakarta-based spokesmen for PTFI and Inalum did not immediately respond to a written request for comment.

Freeport CEO Richard Adkerson said on a call with analysts on July 12 the company had been “working very closely” with the environment ministry and had “received assurance that we will find a resolution of the environmental issues that will be acceptable for all parties. So we’re very encouraged by that.”

Since then he said Freeport had “entered into very productive discussions with the ministry and are making progress with the ministry in addressing these issues and working toward a resolution that we do not expect and the ministry does not expect to adversely affect our operations.”

Parliament also urged the ministry to “conduct environmental risk analysis and environmental audits on a regular basis”, and plans to hold meetings with the ministries of mining and the environment on the matter.

A spokesman for the environment ministry declined to comment further on the parliament request or provide and estimate on how long this process could take.

Indonesia’s mining minister said earlier this month the environmental matters must be resolved before his office could issue a new mining permit for PT-FI up to 2031.

Inalum CEO Budi Gunadi Sadikin told parliament on Monday that “regarding the environment, we told Freeport ‘the past problems are your sins’. In future we will take responsibility together.”

Sadikin added the environmental damage from Grasberg was a shared responsibility as the government already held a 9.36 percent stake in the mine.

Sadikin said a forestry permit for the mine still needed to be issued, and “the 185 trillion rupiah ($12.80 billion) from tailings damage still needs to be cleared up” although he was confident that all the environmental problems could be resolved.

There are 13 of 48 sanctions related to the environmental audit that have not been met yet, according to the environment ministry.

In April, Freeport shares fell to a four-month low after the environment ministry announced tough new rules intended to comply with the BPK audit, just before the company announced its first quarter earnings.

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Government To Transfer BCL Shares To Landowners

Post Courier | July 3, 2018

THE National Government does not wish to hold any shares in Bougainville Copper Limited, Prime Minister Peter O’Neill has told the people of Bougainville.

He said the National Government is going to transfer shares on BCL to the landowners where the mine is located at Panguna, Central Bougainville.

“We have transferred 17.4 per cent out of Rio Tinto shares, National Government does not wish to hold on to those shares and we believe it rightfully belongs to the landowners where the mine is,” Mr O’Neill said in a statement yesterday.

He said the other issue relating to the state-owned shares that is about 19 per cent would continue to have discussions with the Autonomous Bougainville Government and relevant stakeholders as to how these shares could be disposed in the new future.

“But let me stressed very clearly that we have obligation, both ABG and National Government and the landowners of Panguna, we have an obligation to the minority shareholders of BCL who have trusted us and have bought shares in this company many years ago, they are simply mums and dads who have invested in the future of Bougainville and we have to resolve these issues with them in an amicable arrangement where they can be able to easily dispose their shares either to ABG or landowners,” Mr O’Neill said.

According to the 2017 BCL annual report, the Bougainville Government is the major shareholder – its Bougainville Minerals Ltd holding 36.45 per cent, or 146,175,449 shares in the mine. It is followed by the State which has 76,430,809 shares or 19.06 per cent of BCL.

The third biggest shareholder is state-owned enterprise Eda Minerals Limited which has 69,744,640 shares or 17.39 per cent followed by JP Morgan Nominees Australia Limited which has 59,264,812 share or 14.78 per cent of BCL. BCL announced at its annual general meeting in Port Moresby in May that there would be no dividends paid to both national and international shareholders for the 2017 financial year on top of a recorded consolidated K7.30 million loss after tax.

Company chairman Sir Mel Togolo also reported BCL’s consolidated income for the year at K7.63 million which included K5.23 million in interest and dividends and realised gains on the sale of investments of K2.39 million for the year.

“Operating expenses for the year were K14.83 million compared with K11.52 million in 2016 and were under budget.

“The company has sufficient funds to meet recurrent expenditure under the current work plan and remains debt free. “BCL will not pay a dividend,” Sir Mel said.

He said the K7.30 million loss was against a budgeted loss of K15.2 million and consolidated loss of K3.78 million in 2016

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Giant Waste-Spewing Mine Turns Into a Battleground in Indonesia

Grasberg mine tailings Source: Freeport-McMoRan

Danielle Bochove and David Stringer | Bloomberg | June 5, 2018

Every year, Freeport-McMoRan Inc. dumps tens of millions of tons of mining waste into the Ajkwa River system in Indonesia. The company has been doing it for decades, and is demanding the right to keep at it for decades to come.

The discharge of what are called tailings, the leftovers of mineral extraction, is perfectly legal under Freeport’s current contract with the government. But recently, after more than a year of tense negotiations over the terms of a new deal, Indonesia suddenly changed the rules: The Grasberg mine in the highlands of Papua province would have to operate by heightened standards. It shouldn’t have been a surprise, really, considering most every other miner in the world has been forced or has elected to stop discarding tailings in rivers.

Freeport, though, has said that won’t happen at Grasberg. Chief Executive Officer Richard Adkerson has been blunt about it. “You can’t put the genie back in the bottle,” he said in April. “You simply can’t say 20 years later ‘we’re going to change the whole structure’.” Grasberg’s waste management, he added, has “always been controversial.”

The tailings tussle is the latest twist in the complicated relationship between the mining giant and the Southeast Asian republic. How it plays out will have far-reaching consequences in Indonesia. Freeport is a major taxpayer and job provider and has built homes, schools and hospitals in one of the poorest provinces. But Grasberg has also long been a target for environmentalists, indigenous and separatist groups and human-rights watchdogs.

At stake for Freeport are reserves that Bloomberg Intelligence estimates to be worth $14 billion at the world’s biggest gold deposit and second-largest copper mine. Grasberg accounted for 47 percent of Freeport’s operating income in 2017, according to data compiled by Bloomberg.

“What happens at Grasberg has global significance,” said Payal Sampat, the mining program director at the mining watchdog-group Earthworks. “It involves some of the largest global players in the mining industry and one of the leading mining economies.”

Most countries have banned tailings deposits in waterways over concerns they can be toxic, destroying habitats, suffocating vegetation and changing the topography of rivers, causing floods. Most miners have said they’re against the practice regardless of local rules. The industry’s biggest, BHP Billiton Ltd., won’t “dispose of mined waste rock or tailings into a river or marine environment,” as the company put it in a statement.

‘Environmental Burden’

Only two other industrial-scale mines — and a third, small operation — are known to get rid of tailings as Grasberg does, and they’re in Papua New Guinea, which occupies half of the island of New Guinea; Indonesia owns the rest, which is home to the Freeport-run mine. In recognition of risks that could leave “a massive environmental burden for future generations,” the practice has been phased out everywhere else, according to the United Nations’ International Maritime Organization.

Freeport sees things differently. “As we have stated before, the tailings are benign,” said Eric E. Kinneberg, a spokesman, referring to the corporate website for a detailed explanation.

Tailings deposition area in the Ajkwa River system.Source: : Action for Ecology and People’s Emancipation

The Phoenix-based company maintains that much of the sediment in the Ajkwa River system downstream from Grasberg is caused by natural erosion, and that tailings pose no significant — or at least unexpected — threats. “There have been no human health issues or impact on the environment that wasn’t anticipated,” Adkerson said on a quarterly earnings call in April.

The company’s partner in the Grasberg complex, Rio Tinto Group, recently addressed concerns about waste removal. “Riverine tailings disposal is very, very far from best practice,” Chairman Simon Thompson told a meeting in London in April, perhaps highlighting one of the reasons Rio may be willing to sell its 40 percent interest to a state-owned company for $3.5 billion. A spokesman for the company declined to comment for this story.

Rio shares were up 1.5 percent in U.S. trade at 2:54 p.m. while Freeport gained 2.8 percent. Copper and gold prices were also higher.

‘No Realistic Alternative’

“If you think about it from Rio Tinto’s perspective, one of the biggest problems with this mine is the environmental issues. I think that’s an incentive for Rio to get out,” said Christopher LaFemina, an analyst at Jefferies LLC. “This is a critically important part of Freeport’s overall value. For Rio Tinto, it’s not.”

The problem for Freeport and Indonesia is that there’s no easy solution. “There has been no realistic alternative identified,” Thompson said. Freeport’s local unit studied 14 alternatives for tailings disposal — including dams and pipelines — and concluded all were too risky in a mountainous terrain prone to earthquakes and heavy rainfall.

As it is, the heavy ooze wends its way through glacier-capped valleys, descending almost 4 kilometers (2.5 miles) to tropical lowlands and a 230 square kilometer deposition zone, where roughly half the tailings are parked. The rest flows on to a river estuary and the Arafura Sea.

“The company has sacrificed not just the river, but also the coastal area,” said Pius Ginting, coordinator of Action for Ecology and People’s Emancipation, an Indonesian environmental group.

50 Million Tons

According to Earthworks, Freeport sends more than 76 million metric tons of tailings and waste rock into Indonesian rivers every year. The company puts the 2017 figure at 50 million tons. Without spelling out precisely how the requirement should be met, Indonesia told Freeport that it would boost to 95 percent from half the amount of tailings that must be recovered from the river system, according to Adkerson.

That was a shock that sent Freeport’s stock tumbling after Adkerson revealed it on April 24. Shares have largely recovered as investors bet the government will fail to follow through.

The negotiations to secure the right to keep mining Grasberg until 2041 had already been complicated by an edict that foreign miners sell majority stakes in their assets to local interests. Rio’s apparent interest in divesting would ease that problem for Freeport, reducing how much it would need to unload.

Stunning Asset

Even if its share dropped below 50 percent, Freeport as an operator could still win big — Grasberg is a stunning asset, expected to produce more than 520,000 tons of copper in 2018 and more gold than any other mine. Of course, Indonesia’s tailings mandate may be a negotiating tactic, as some Freeport investors said they suspect. Ilyas Asaad, inspector general at Indonesia’s Environment & Forestry Ministry, didn’t respond to a request for comment.

The company is holding its position: The discharge of tailings into the river system is an inescapable consequence of keeping the mine in operation. If the government backs down, it will be “a political decision,” said David Chambers, a geophysicist who runs the U.S. nonprofit Center for Science in Public Participation. “There aren’t many governments that are willing to sacrifice those kinds of environmental resources for the financial resources.”

Few investors have publicly seized on the tailings mess as a reason to shun Freeport. One was Norway’s $1 trillion sovereign wealth fund, which in 2006 excluded Freeport from its investment universe and in 2008 sold its holding of about $850 million of Rio shares, citing Grasberg’s use of the river system to dispose of tailings.

“The spotlight has shone on these issues a lot more brightly in the last couple of years,” said Andrew Preston, head of corporate governance in Australia for Aberdeen Standard Investments, which owns shares in Rio and BHP. The “wake-up call,” Preston said, was the 2015 failure of a tailings dam at BHP’s Samarco iron-ore joint venture with Vale SA in Brazil. Billions of gallons of sludge escaped to travel hundreds of kilometers down the Doce river, killing at least 19 people and leaving hundreds homeless.

Jefferies’ LaFemina said investors are betting on the status quo in Indonesia. “In negotiations, different sides are trying to get leverage.” In the end, “I am not expecting there to be a significant change to how this asset operates”.

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Rio Tinto about to offload stake in Grasberg mine for $3.5 billion

Grasberg mine on the island of New Guinea, one of the world’s biggest sources of copper and gold. (Image: Google Earth)

Commentary from SkyTruth: “News that Rio Tinto is negotiating to sell out its stake in the massive Grasberg Mine in West Papua (Irian Jaya). We’ve written about this mine before: uncontrolled dumping of tailings into rivers flowing past the mine has caused the deposition of tailings across a broad swath of former rainforest downstream, creating a moonscape 30 miles long and up to 2-1/2 miles wide. By selling out, Rio Tinto might be able to dodge any liability for that damage — although their partner Freeport McMoRan may still be on the hook, and apparently the “tailings issue” is holding up the sale”

Cecilia Jamasmie | Mining.com | 23 May 2018

World’s No.2 miner Rio Tinto confirmed Wednesday is ready to sell its stake in the giant Grasberg mine, the world’s second largest copper operation, to Indonesia’s state mining holding company Inalum for $3.5 billion.

The move could mark the end to a long-drawn-out, three-way dispute over the mine, which has been centered on bringing local ownership of Grasberg up to 51%, a main requisite set by the Indonesian government to allow Freeport-McMoRan to keep operating in the country.

Discussions with  PT Indonesia Asahan Aluminium, known as Inalum, and Freeport — the other two companies engaged in talks — were ongoing, Rio said, “including as to price,” noting that no agreement had been reached.

Rio’s deal with Freeport was struck in 1995 and entitles it to a 40% share of production when certain output levels are hit. But as a result of strikes and other disruptions and as the open pit at Grasberg nears the end of its life, the Melbourne-based miner hasn’t seen any benefit since 2014.

Chief executive Jean-Sebastien Jacques publicly questioned Grasberg’s place in Rio’s future back in February 2017. He followed in June with a remark about the mine being a world-class copper deposit, which might not be a world-class mining investment.

“There is a fundamental difference between a world-class resource and a world-class business,” he said again last week at the Bank of America Merrill Lynch Global Mining, Metals & Steel Conference.

Indonesia and Freeport have been negotiating the terms for the company to give the government a majority ownership in Grasberg for over a year. But until today, it wasn’t clear what would happen to Rio’s interest in the mine.

Grasberg, the world’s second-largest copper mine and fourth largest gold operation, has transitioned to a fully underground operation, set to reach full capacity by 2022, when it will produce 160,000 tonnes per day of ore.

The additional Deep Mill Level Zone block cave mine, currently under construction, is projected to contribute an additional 80,000 tonnes per day of ore once at full capacity, expected in 2021.

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Papua New Guinea’s resource curse

Armed clan near Komo, Hela Province, Papua New Guinea. Photo by Michael Main

Disaster strikes the nation’s massive gas project

Jo Chandler | The Monthly | May 2018

Brisbane, February 17, 2010. A clutch of ExxonMobil executives gathers for a briefing from Papua New Guinea specialists: a geographer, an epidemiologist and an agronomist. All academics at the Australian National University, they’ve clocked up decades of fieldwork in the remote highlands. They’ve assembled some slides that they hope will give the overseers of ExxonMobil’s $US19 billion liquefied natural gas project, PNG LNG, insight into the lives of the people whose resource they are preparing to pump out of the country’s hinterland and ship to markets across Asia.

The specialists’ pitch is a hard-headed evaluation of looming risk. And it is pointedly plain-spoken, assuming little, if any, knowledge of Papua New Guinea’s geography, history or staggeringly complex cultures.

The good news, they say, is that local people, and the provincial and national governments, want the project.

And the bad news? Expectations are perilously high. The desire for PNG LNG is founded on the belief that it will bring not only wealth to landowners in its footprint but also desperately needed services, roads, power, jobs and economic growth to the region. Health care for most locals is a long walk to an aid post that in all likelihood has no health worker or medicines. Child mortality rates are almost 40 times what they are in Australia, and markedly worse than elsewhere within the nation. Education levels are woeful – 64 per cent of men and 77 per cent of women living around the gas source have no formal education.

The PNG LNG operation will be dropping into a landscape in which the state barely casts a shadow. Violence is rife, and police and justice elusive. Tribal conflict, deeply rooted, has waxed and waned over the years in what is today called Hela Province. Now anxieties and rivalries are flaring around who will and won’t benefit from the gas mother lode, the experts say, with the potential to escalate to blockades, sabotage and armed resistance. Colleagues have been warning about the stockpile of heavy weapons in the highlands for years.

While numerous promised works were built into the benefits-sharing agreements wrangled with landowner representatives a year earlier, these PNG specialists in Brisbane urge ExxonMobil to invest deeply in education, health, livelihoods, infrastructure, security and monitoring. They point to the junior project partner, PNG veteran Oil Search, which has long-established health programs that are highly valued by local people – why not piggyback on those relationships?

Next slide. “Contexts: other large resource projects.”

There’s the Porgera goldmine (“Police attack migrants and locals, burn houses, shoot people – company accused of breaches of human rights”) and Ramu Nickel (“Chinese company ignored local social and employment conditions – Riots … Mine closed temporarily”). And then there’s Ok Tedi, which in the ’80s became shorthand for BHP’s international shame after a monumental environmental disaster when a tailings dam collapsed.

At the top of the list is Bougainville, a shattering and multilayered episode distilled thus: “Second generation unhappy with benefits … [Bougainville Copper Limited] said it was the PNG Government’s responsibility to fix … Power supply sabotaged / PNG Defence Force soldiers attacked civilians … Years of civil war result [in] permanent closure of mine and high death rate.”

The PNG LNG operation, however, is touted as a game changer, the biggest resources project in the Asia­-Pacific, with capacity to double GDP. The Australian government has backed it with a $US350 million investment. Compared to the mines in the slideshow, its environmental footprint is light.

But PNG LNG will sit in one of the most culturally fascinating and incendiary landscapes imaginable. The Huli people of Hela Province, keepers of the gas flame, have forever seen themselves at the centre of the universe. For better or worse, the implications of this project – regionally, economically, geopolitically – are seismic.

The last slide is titled “The beginning, not the end”. A small Huli boy is juxtaposed with a barefoot youth crouched by a roadside and nursing a high-powered automatic rifle. “I will be 18 years old in 2022,” says the caption. “And if I have not been educated and I am still a subsistence farmer living in relative poverty, I am going to be really angry! I may be armed and dangerous!”

Tari, capital of Hela Province, February 1, 2018. By the time the Air Niugini Dash 8 drops through the highlands pall we’re almost jumping distance above the forest canopy. It’s broken by the contortions of rivers and the odd road, and clearings occupied by round huts and crops of sweet potato and greens.

Beyond the blur of the propeller, the clouds close like shutters on the distant ranges. There was no world beyond this fortressed horizon for the Huli until first contact in the 1930s. The first permanent colonial patrol post didn’t arrive in Tari until 1951. Then came the missionaries. The prospectors. The oilmen. And then, a decade ago, after a few false starts, the advance guard of PNG LNG.

The ancestors had seen them coming, these “red-legged” men. The Huli knew all about the subterranean power buried within their country, the fire (gas) and water (oil). They navigated around it with ritual. Their lore was selectively enlisted for the PNG LNG hard sell. It was destiny that the underground fire the Huli call Lai Tebo would “light up the world”, bringing in wealth that would transform the nation’s economy and the lives of its citizens.

But as I learnt on a previous visit in 2009, en route to villages with a health outreach team, that account neglected certain critical elements.

“When the white people come to take the power from the earth, there will be terrible fighting and Huli culture will fade away,” Dr Hewali Hamiya, the then CEO of Tari hospital told me. He was at the wheel of a 10-seater troopie, navigating broken roads, expanding on politics (“the poor and illiterate are spectators in our own land”) and explaining Huli Cosmology 101.

In an ancient narrative once described by ANU anthropologist Chris Ballard as “a user’s guide to apocalypse”, the Huli seek to influence the nature of the final event. This apocalypse would be “the terminal point in a long, linear process of moral and ecological decline”. It’s a mythology that has provided fertile ground for fire-and-brimstone Christian missionaries. And it has endured, fuelled by unfolding events.

Much of the mountainous interior of Papua New Guinea is too steep, too high or too wet to produce crops. But the town of Tari, at 2100 metres, sits in a hospitably undulating agricultural sweet spot, a magnet for people and trade from far-flung hamlets. From a window seat on the final approach, it looks like tropical Arcadia. It’s not.

By all accounts, there is a social emergency playing out, one that has ancient heritage but in modern times is enmeshed with both the history and the fate of PNG LNG. The project taps its source in the nearby limestone ridges. Concerned chatter among the Pacific cognoscenti has been gaining volume, the most dismayed among them fearing that Hela could explode. They recall and contrast memories of the Bougainville situation. But PNG pundits know better than to try to anticipate the future in the “land of the unexpected”. The cataclysm that will occur in 25 days’ time is beyond anyone’s control.

By now PNG LNG has been operating for almost four years, dispatching hundreds of shipments worth $US13.9 billion at last count. But none of the estimated $300 million worth of landowner royalties has so far found its way to the people at its highlands source. Indeed, the beneficiary landowners in Hela have yet to be identified. Their dues are meanwhile held by the PNG government.

There’s also no sign of many other promised benefits: the tertiary campuses, an agricultural research centre, roads, water and sewerage projects. The province sends power over the mountains to run the Porgera mine, but its people still have no lights. Even in Tari, power hiccups with the dodgy town generator. Oil Search’s managing director, Peter Botten, says more than $237 million has been paid to government entities and landowner groups to build infrastructure, but “the reality is they haven’t been delivered on the ground”. (ExxonMobil declined an interview, but in a statement said the project had put more than $300 million into projects and programs.)

In a dilapidated church hall in Tari, I meet Janet Koriama, the president of the Hela Council of Women. She is explaining why she declined an invitation to attend the legendary 2009 gathering of thousands of project stakeholders, where benefits-sharing deals worth more than $7 billion over the 30-year life of the project were thrashed out among (overwhelmingly) male landowners after days of negotiations and, infamously, much beer and debauchery.

Koriama thought it was wrong to host the forum in the town of Kokopo, 1000 kilometres away from the project site. (So does PNG law, and so the deal had to then go to a series of local forums.) “And I was a bit scared because of what tradition says.” Koriama is referring to the belief that you can give away “the water” (the oil, which has been pumped out nearby for decades), but not the gas. “They said you give Lai Tebo away, the fire will fuel so many conflicts. The prophecy is fulfilling.”

Downtown Tari comprises the airstrip, roads so fractured that it’s quicker (though not safer) to walk, the heaving open market, the bank (hour-long queues for the working ATM), the hospital, roadside trade stores (bigger Chinese stores have shut down in fright), a handful of tired public buildings, and the bones of several unfinished two- and three-storey structures – relics or promises of the mother lode, it’s hard to tell. It services a population somewhere upwards of 300,000.

Koriama is one of half a dozen leaders who come to me for interviews after I abandon plans to venture out to the project villages – only an hour’s drive away, but too risky. Hela Province is infamously combustible, and things are hot. Fighting flares unpredictably, with guns and bush knives. Police are lying low after two officers were murdered, the shooter accusing them of selling ammunition and weapons to his tribal enemies. Young men in dark glasses and long coats – to conceal their weapons – work their phones, their backs protected by the red-earth cliff that falls away at the edge of the market. Oil Search health workers I’d hoped to meet at Tari hospital have been hastily extracted because of a scare.

One way or another, the trouble is all about money, says Koriama. “The truth is we don’t have funds. No funds – royalties, equities, support grants.”

The project has been shattering for women and children, she says. “Women are the ones who are in the house … we pay for school fees, for the clan compensation [for deaths], all these things. But women are not recognised and we are not benefiting from the LNG … The big money – where is it going?”

Koriama is savvy – politics in PNG is no place for the faint-hearted. She’s dealt with corporates as a landowner in the Mt Kare goldmine. But she can’t get traction with PNG LNG. She travels to Port Moresby and talks to ExxonMobil and the government. “I said, ‘We are the women of Hela, but we are not benefiting’ … I said, ‘How do we do it?’ Do we write a letter? Do we dress up? … But we are not recognised.”

All that said, she declares that none of the problems are the fault of ExxonMobil or its partners, Oil Search and Santos. “They are here to help us.” She sits on the hospital board with Oil Search’s Peter Botten, under whose chairmanship (and resources) that neglected facility has become unrecognisably functional. (The host of my guesthouse has twin baby girls, Faith and Grace, and a dramatic birth story that none of them might have survived without what the hospital has become.)

Koriama lays responsibility for all the disappointments squarely with PNG authorities, the national and provincial governments, and “our own sons, who were educated, who were supposed to put it together, to look into who is owning the area … I am blaming ourselves.”

The distance between what PNG LNG promised and what it has delivered is an issue preoccupying many close observers of the project. ANU economist and PNG specialist Stephen Howes has highlighted concerns about the failure of royalties to flow to landowners, for this and future projects. “The other surprise is that it has generated hardly any revenue for the PNG government.” This is despite outputs being much higher than anticipated. Most of the blame is put on tax concessions criticised by the International Monetary Fund and the World Bank as too generous. But “we still don’t have a complete answer on why tax revenue has been so far below expectations”.

Botten blames a dramatic drop in oil prices. He defends the project’s economic contribution to the country, citing PNG National Research Institute modelling that says PNG LNG “has delivered tremendous benefits to the PNG economy and is expected to do so in the future”.

But a new analysis by the economist Paul Flanagan, an associate of Howes at the ANU Development Policy Centre and a former executive in the Australian and PNG treasuries, catalogues a “yawning chasm between spruiked expectations and outcomes”. Oil prices are not the explanation, he says – they are in line with predictions, “[but] all the other predictions about economic gains were well off”.

His report for Jubilee Australia, an anti-poverty research centre attached to the Australia Institute, found that rather than a doubling of the economy there has been a gain of only 10 per cent, all focused on the largely foreign-owned resource sector. Household incomes were expected to increase 84 per cent but have fallen 6 per cent; jobs were to grow by 42 per cent but are down 27 per cent; government spending on services and infrastructure was to kick up by 85 per cent but has fallen 32 per cent; imports were expected to rise 58 per cent but have fallen 73 per cent. “On almost every measure of economic welfare,” Flanagan concludes, “the PNG economy would have been better off without the PNG LNG project.”

A trio of male leaders comes in to meet me in Tari from project hotspots: Henri Harinda from the town of Angore, Pipe Tundu from Komo, and Haguai Kamia from Hides. Like Janet Koriama, they are damning of the PNG government, but they don’t share her regard for the companies. They each bring piles of worn paperwork tracking their land claims and, in English and the local languages of Tok Pisin and Tok Ples (via an interpreter), attempt to explain their rights through the labyrinthine local lore of customary landholding.

Individuals might have a tie to a piece of land on the father’s line (“A” class), or on the mother’s or wife’s line (“B” class), or through association (“C” class). Any piece of land might have several custodians with overlapping rights. These rights are archived not in titles but in fine-grained memory going back generations. ANU geographer Bryant Allen, who worked on contract for ExxonMobil, has stood in the bush with his GPS and a posse of clan leaders countless times trying to determine boundaries. “Sometimes they will say, ‘Bryant, you go over there, we have to talk about this.’ And there will be some shouting and screaming. Then it stops. Three or four people have said their genealogies and argued their case, and someone has said, ‘You’re right,’ and they all agree.” Mostly, he says, it sticks.

In the years leading up to PNG LNG, local landholding custom was explored and explained in depth to corporates and bureaucrats by experts such as Allen and the anthropologist Laurence Goldman. Goldman likens residency arrangements on the land to hotels: some rooms are occupied by descendants of the hotel ancestor, some get a room by virtue of a female link (but might get kicked out at any time) while others are occupied by friends – so long as nothing rocks the boat. Yet as the landowners I meet tell it, the strongest land claim these days sits with the man who is drinking buddies with the company community affairs rep or who has the most persuasive English.

The village of Hides sits on a ridge the locals call Gigira, home of the underground fire, Lai Tebo. It is at the heart of the project, hosting the gas-conditioning plant and several wellheads. Haguai Kamia has spent five years in court seeking rental payments for key sites. He won his case in 2017 and was awarded $100,000 back rent. The court orders, filed in a worn leather satchel, cost him most of that in legal fees, he says. So far he hasn’t been able to retrieve a larger payment, for environmental damage, that he says ExxonMobil gave to the wrong person. Like everyone, he’s still waiting on royalties. When the money comes he will be obliged by custom to share it between seven clans – dozens of individuals – and the church. All of them, waiting.

Kamia was one of the landowners involved in a blockade of the Hides plant in August 2016, a defining escalation in tensions between locals and the project. ExxonMobil’s blanket position is that payment and distribution of royalties and other benefits is the responsibility of the PNG government – nothing to do with the company. Many landowners accept this, but they also know that they won’t get action from the government unless they bring pressure to bear on the project. And around it goes.

Later I speak to three senior village women who live near the plant. They say that fighting has displaced many people, many schools are closed, and many families are hungry. Meanwhile, “the government is employing policemen to just look after the camp, and neglect the people”. The three women also worry about waste from the plant contaminating the water they rely on to cook and wash. They ask me not to publish their names.

Kamia says his boys dropped logs over the Hides access road “because we are crying for the royalties to be paid”. Armed men occupied the plant and shut it down. An ultimatum was given to the national government to honour benefits-sharing agreements within seven days. In the end a deal was brokered, including a government offer of $14 million “to try and soften the mood”, says Kamia, “make [us] feel, Oh, there is something bigger coming, just sit down and relax.

Things could have gone differently. Kamia says a lot of big weapons were moved into the area. There was potential for the situation to explode. But soldiers and police guarding the project are mindful that locals outstrip them for firepower, says Michael Main, a Melbourne-based anthropologist who was doing fieldwork in the area at the time. “One [police officer] told me, ‘We’re not going to risk our lives for ExxonMobil – I can see people have got nothing out of this project. We’re not going to go against the locals.’”

Main also tells of encountering young men who had hauled 20-kilogram rice bags packed with marijuana through the bush to the West Papua border and traded it for Indonesian military weapons. He observed landowners growing emboldened. Whether the Huli have the cohesion to mount a Bougainville-style resistance is a matter of lively dispute, but their firepower is not in doubt.

In December 2016, shortly after an ambush on a political convoy killed two men, and with a national election looming, the PNG government announced it would deploy the PNG Defence Force to the project area to quell violence. But skirmishes continued, including kidnappings of PNG LNG personnel and attacks on facilities. Last November, after an ExxonMobil security manager was kidnapped and released unharmed at Angore (thanks to the intervention of a local pastor, according to Main’s sources), the company evacuated non-essential staff.

Main has written a report exploring the backstories of recent clashes, often identifying threads relating to PNG LNG. His analysis, which will also be published shortly by Jubilee, echoes warnings from a gathering of development and resources specialists and scholars at ANU back in 2007 that “far from improving the wellbeing of [highlands] communities, these new sources of revenue have created new sources of friction”.

The question of how powerfully the PNG LNG project factors in the tempo of tribal conflict provokes intense debate among scholars and old PNG hands. Peter Botten says he’s seen profound cultural change over 25 years in PNG. “There were no mobile phones, tribal culture was relatively straightforward, and the elders and leaders were respected and listened to.” But it’s simplistic to blame big projects, he says. “The resources industry has really had very little effect apart from bringing more money in. Fights aren’t over jealousies [about] resources issues; the fights are very strongly around traditional issues of ‘you took my wife’ or ‘you took my pigs’, and then someone gets killed and then it’s payback.”

The Huli are infamous fighters. (We are sharing, caring and loving, says Janet Koriama, until you take what is ours.) But warfare was historically highly regulated and centred around compensation for losses, says anthropologist Chris Ballard. The LNG project “has massively ramped up rivalries, fuelled the arms race, and provided everyone with some level of grievance”. That said, apportioning blame is “hugely complicated, and I would be deeply suspicious of any narrative that claimed to know otherwise”. Another expert, who lived in the area for many years, argues that “government at all levels must bear responsibility”.

I ask Pipe Tunda, a landowner from Komo, how people are feeling. He lets rip. The interpreter summarises: “They are traumatised, it is really pressuring them, it could explode at any time … They are hungry and they have nothing.” During the construction phase, Komo was buzzing with jobs, aircraft bringing in equipment, camps full of workers. Now it’s a no-go ghost town.

Tunda is party to a judicial dispute-resolution process set up to try to resolve competing landowner claims that have dragged on for more than three years. He’s also involved in a process of “clan vetting” set up by the PNG Department of Petroleum and Energy to try to find ways to get royalties paid to rightful clans or sub-clans in Hela. That mission is now eight years over deadline.

Janet Mbuda, a schoolteacher from Hides who interprets some of my other interviews, says much of the danger comes from young men, teenagers mostly, who left school because of fighting or the lack of school fees. “They can kill anyone … the white men, the black men, they don’t care … their mindset is spoiled. They were expecting something high, but their life went back to zero.”

Around 80 per cent of Papua New Guineans live beyond the reach or interest of a largely dysfunctional state. Land, most of which is still in customary ownership, is cherished as central to security, society and survival. Papua New Guinea law recognises this. The Oil and Gas Act 1998 requires that before convening a development forum for a new project – the meeting where stakeholders thrash out terms and conditions – the petroleum minister shall determine the persons who will receive royalties and equity benefits. Yet today those beneficiaries remain unidentified in Hela.

“Somehow all the construction went ahead without this important part of the law being complied with,” says Stephen Howes, who with PNG lawyer Sam Koim co-authored an analysis on the stalemate. Howes says the responsibility – and the failure – to make the determination rests with the PNG minister. But “it’s the responsibility of all parties to ensure compliance”.

“In hindsight, it’s a mystery as to how this happened given ExxonMobil is a multinational and pretty risk averse, and worried about its reputation. And the only answer I have been able to come up with is that they thought [the determination process] would happen pretty quickly.” But Howes says that assumption meant that “Exxon and the other developers were taking on a massive project risk”.

Howes also questions Australia’s $US350 million investment in the project, through the Export Finance and Insurance Corporation (EFIC) in 2009. At the time it was the biggest foreign loan made by the Australian government. “Given that it was a legal requirement prior to construction, EFIC should have put as a condition of disbursement that landowner identification be determined by the minister.”

ExxonMobil deflects questions on this issue. But Oil Search’s Peter Botten answers emphatically. Determinations were made for every licence area, he says, albeit with landowner leaders rather than individuals. “I was there on the ground [in Hides] at four in the morning when it was signed. They had the mandate from their people, I assume, to sign off on that, otherwise they wouldn’t have done it.”

Colin Filer, an anthropologist and resources expert at ANU who helped write the PNG legislation, explains that what the law requires is for companies to undertake and submit to PNG authorities “full-scale social mapping and landowner identification studies”. But what that means is open to interpretation.

Filer says that in 2006, as the PNG LNG project was rapidly taking shape, meetings were held in Brisbane and Canberra between the PNG government and ExxonMobil to try to sort out what the process should and would entail. He was there as an independent consultant. The PNG side argued it wanted a kind of “telephone directory” of Huli landowners, something that would identify individual beneficiaries.

“And we said to ExxonMobil, ‘Well, that’s probably what you ought to produce.’ But then the question was, who was going to pay for it? Because it was going to be an expensive thing. And ExxonMobil said, ‘Well, we’re not paying for it – we’re not required to do this [in] the Act.’”

So no telephone directory, partly because it was going to be extremely difficult (some argued impossible) and costly. And “because basically these guys in Texas can’t see the point”, says Filer.

“They don’t seem to have ever been able to adapt their corporate management style to the realities of Papua New Guinea. They are still operating as if it was just any other gas project anywhere else in the world. It could be Siberia.”

The upshot is that four years down the track the landowners of Hela are still waiting. As angry as many of them are, the rationale is that they can’t and won’t mount any substantial, sustained or coordinated attack on the project for fear of never seeing their money.

But Howes argues that “people aren’t always rational, especially over long periods of time in a conflict-prone area. And the second problem is that once the [distribution of royalties] is finally made, there will be winners and losers, and the losers then will protest.”

In the capital, Port Moresby, I got a glimpse of the superheated tensions among landowners when I found myself squashed in the National Court’s tiny public gallery with about 60 Huli men hearing rulings on a disputed portion of the $13 million payment that was promised to break the Hides blockade 18 months earlier. (The only other woman in the court was the judge.) The desperation of the Port Moresby–based landowners, some of whom have been enlisted for years by the companies to keep a lid on tensions at home, was palpable.

When I recall the scene for lawyer Sam Koim a couple of hours later, he provides the backstory. “These people have come to Moresby, they live on borrowed money, they hire vehicles, they are chased after by loan sharks.” Koim has observed the fallout, the fragmentation even within families, fighting and suing one another. Hela Province is not like Bougainville, he says, where you had an organised and cohesive society. “But the people [in Hela], with due respect, are the last people you want to play games with. They may not be organised, but it needs just a spark.

“I’ve warned the Exxon guys, told them, ‘Don’t be arrogant.’ They think these people up there are ignorant, but the moment they are enlightened, they cannot continue to be suppressed,” says Koim. “They have the weaponry to do it, they have the potential to do it, they have the might to do it.”

And then the earth roared.

The 7.5 magnitude earthquake struck under Mt Sisa in Hela Province at 3.44am on February 26. It poured mountains of earth into rivers and destroyed food gardens, choking the lifeblood of countless families, so its cruelty has barely begun. As well as many deaths there were reports of communities desperately eking out supplies waiting on unreliable food drops and suffering outbreaks of diarrhoea. Damage shut down PNG LNG facilities for more than six weeks, with ExxonMobil declaring force majeure on its exports. It announced it would be restarting operations on April 13.

The response from the outside world to the crisis was slow, largely blamed on remoteness. ExxonMobil said it would give $1.3 million to earthquake relief, and Oil Search $6.4 million in cash and kind. The latter quickly mobilised its helicopters to take a lead role in assessing needs and delivering relief, ferrying Prime Minister Peter O’Neill into the crisis where he consoled bereft survivors daubed with mourning mud.

But distress soon turned to anger on the ground. “This is 5th Day,” wrote Hela governor Philip Undialu in a Facebook post.

Where are all the helicopters used to fly around Hela looking for Oil and Gas? Why a number of helicopters still flying around the disaster areas but not interested in helping victims? Why we have helicopters for evacuating employees but nothing to rescue injured people? Don’t we have social obligation to the communities?

“The Tari fight is getting worse,” tweeted the Catholic bishop of Mendi, Donald Lippert, on March 30. “They’ve come to the Mission primary school and burned down four staff houses. What’s next???? Most people have run away carrying their belongings on their backs and dragging their pigs behind them. PNG 2018!!!! Good Friday!!!”

The same day, James Komengi, the disaster response coordinator with the Uniting Church in Tari, sent me an email. “We are outside on the road watching the communities on one side of town burn down. We are told many men and women have been shot dead. Will confirm deaths.” Seven fatalities were later reported, among them three teenage schoolboys – one shot, two hacked with bush knives. The killings were described as tribal payback for the shooting in the Tari market of a local councillor two weeks earlier.

Seismic and social aftershocks continued, one crashing upon another. In Tari, violence spiralled. Under the headline “Tari on the Brink of Anarchy”, The National’s reporter wrote that people were more fearful of the fighting than they were of the earthquake. Governor Undialu said he had fewer than 20 police to secure the town. Meanwhile, a specialist squad was up the road, guarding the ExxonMobil plant at Hides. “Why should PNG LNG Project be given preference over the lives of ordinary people?” Undialu asked. “I’ve been asking the police commissioner to … give us additional manpower, which has fallen on deaf ears.”

By mid March the quake’s death toll stood at 125. Soon after, more than 55,000 people had been displaced by either the quake or the fighting, and 270,000 were in need of assistance.

With the landscape rolling and roiling with powerful aftershocks, the traumatised population looked for explanations. While all else was broken, Digicel’s communications towers were working overtime. Some turned to the spiritual, recalling the Lai Tebo prophecy, some to science. Social media erupted with a mix of passionate religious rants appealing for mercy from the Huli god Dadagaliwabe, and cut-and-pastes from geological journals on “induced seismicity” (where minor earthquakes and tremors can be triggered by human activity). These “Facebook scientists”, as James Komengi describes them, were “confusing people who are 80 per cent uneducated” by blaming the earthquake on gas extraction. Either way, the project was squarely in the frame.

“I now demand answer[s] from Exxon and my own government as to the cause of this unusual trend in my Hela,” wrote finance minister and local MP James Marape on Facebook. The prime minister appealed to the Australian government to provide scientific advice.

When Geoscience Australia responded with a report explaining that the quake was consistent with the regional plate tectonics that have shaped the highlands over millions of years, and that it was highly unlikely to have been triggered by mining, exploration or extraction, Hela governor Undialu wasn’t persuaded. Nor was former justice minister Kerenga Kua, who in parliament argued that the Australian government could not carry out an independent assessment because it had a financial stake in the project.

Peter Botten was quoted saying that the Huli superstitions around the cause of the earthquake represent “a communication issue”. But anthropologist Michael Main argues it is, rather, a critical development issue, arising from the collision of the conditions in Hela before the quake and the trauma in its wake. “Huli cosmological belief that the extraction of their gas will bring about the end of the world has been fuelled over the past four years by growing resentment over the failure of the project to come good on its development promises,” he wrote for the scholarly blog EnviroSociety.

If the PNG LNG project had delivered on its promises of education and training opportunities, infrastructure, business development and alleviation of poverty, then the concern of its Huli landowners might be over how to utilise their resource to better develop their province to cope with earthquakes into the future. As it is, the PNG LNG project is logically understood in the context of their resource curse.

In an email to me, American-born Bishop Lippert described a maelstrom of factors at play: frustration at the failed promises of the PNG LNG project (“no matter what the causes … legitimate and illegitimate”); young men impaired by blind rage and the abuse of cannabis or alcohol; the breakdown of traditional society with nothing to take its place … “The perversion of cultural constraints has opened the door to killing women and children, something that would be rare in the past, so I’m told.”

On March 30, an emergency order was issued, declaring that “the security situation in Hela Province (and specifically the town of Tari) has deteriorated to the point where the lives of relief workers, public servants and the general public are manifestly in danger”. The order mobilised the PNG Defence Force to bring the situation under control using “all reasonable force”. There was a “shoot to kill” curfew from 6pm to 6am, Bishop Lippert wrote. The United Nations and other agencies evacuated their relief teams, who had still not returned by mid April.

James Komengi keeps a running list of requirements for when the relief teams return: tarpaulins, water containers, building materials, tanks … “The rains are saving many families,” he writes. “Without rain, many people will become very sick.”

In a closed Hela Facebook group, someone posts a picture of four high-powered automatic weapons leaning against the wall of a grass hut. The post says the guns were stolen from a mobile police squad – they’re being offered for sale. Papua New Guinea’s highly active social media commentariat furiously debates whether this might become another Bougainville, and what else it signals for the fragile nation’s future.

“The worst-case scenario is one that PNG has already experienced,” argues ANU economist Paul Flanagan in an article for East Asia Forum.

The loss of social licence for the Bougainville copper mine in 1989 started a decade-long civil war that led to thousands of deaths, undermined development prospects on the island for a decade, damaged PNG’s economy more broadly, and quite directly led to the removal from office of prime ministers Paias Wingti and Julius Chan.

“There are real risks that the parallels [in Hela Province] will be much more manifest than to date,” Flanagan tells me. “Almost every wrong policy is being pursued – everything we wouldn’t want to avoid a resource curse.”

If the crisis in the wake of the earthquake persuades the PNG government to find a way to get overdue royalties to Hela landowners, and along the way rethink some of its macroeconomic policies, “hopefully things will go well”, Flanagan says. It’s not too late, he argues, to change the development path from a resources focus to something more inclusive that builds on agriculture and other areas. “It will take a decade. It’s got to start.”

If not, he warns, the consequences will be worse than what Papua New Guinea endured through the 1990s, when incomes across the country fell by 25 per cent. Provinces with healthier economies would resent the drain of poorer ones. “That is the sort of thing that leads to these fracturing tendencies in the nation state of PNG,” says Flanagan, an observation that feeds into increasing anxiety about the fragile geopolitics of the Pacific.

Stephen Howes argues that the failure of royalties to flow to Hela landowners already casts a significant pall over the prospects of future resource projects. “The PNG LNG project was supposed to send the global investment community a strong signal that PNG could manage large resource projects. But it is increasingly evident that this one very important piece of the puzzle was never put in place. And that will surely be a deterrent to other potential investors.”

Michael Main says that not so long ago, despite all the distress of landowners around the project, he would not have imagined that they would ever organise to put an end to it. “But things change, and the structures that were there – and that I thought would mean this project would keep going – are themselves subject to change in a way I hadn’t expected.” And that was before the Huli apocalypse.

Laurence Goldman, an anthropologist with many more years’ experience in the highlands, albeit not recently, won’t venture any such bets. “PNG has a wonderful way of contravening the best guesses that people have.” It’s an observation that evokes a favourite line from another PNG veteran, the late historian Hank Nelson: “As is often the case in Papua New Guinea, unfolding events have continued to unfold.”

Back in Australia, I receive an email from James Komengi in Tari. He says that there’s a lot of talk about protests planned in Hides and Tari against the project, maybe another shutdown. “Many people here [even outside the project area boundaries] are demanding they be compensated as landowners because the ‘man made’ earthquake disaster has affected us.” Events are unfolding.

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Bougainville imposes moratorium on Panguna mine over fears of civil unrest

The Panguna mine, located in the east of Papua New Guinea in the Autonomous Region of Bougainville, was at the centre of Bougainville’s decade-long civil war.

In dramatic policy turnaround, government determines people feel Bougainville Copper Limited doesn’t deserve a social licence to run the controversial mine

Helen Davidson | The Guardian | 10 January 2018

The Bougainville government has enacted an indefinite moratorium on renewing the licence of a controversial mining company over fears it could reignite violent civil conflict.

In December Bougainville landowner groups were called to vote on allowing Bougainville Copper Limited (BCL) to renew their mining licence and potentially reopen the Panguna mine, but the vote was split.

“If we went ahead now, you could be causing a total explosion of the situation again,” the Bougainville Autonomous Government (ABG) president, John Momis, told the ABC on Monday.

The Panguna copper mine was central to the civil war and blockade in the 1990s that killed tens of thousands of people. Conflict escalated after landowners protested environmental damage by the mine and the lack of economic benefit for local people.

The Rio Tinto-owned BCL was forced to close the mine, and discussion in recent years about reopening it has sparked hostilities in the nearby communities.

In June protesters blocked Momis and other political leaders from accessing Panguna to sign an agreement with landowners, which the ABC reported would have opened the way for BCL to work towards returning.

Legislation passed in 2015 gave traditional landowners greater ownership over resources as well as powers over the establishment or reopening of mines, but confusion and division remains.

At the time of the BCL vote local journalist Aloysius Laukai reported Momis said mining by any company would be “untenable” under the circumstances. However on Monday Momis told the ABC the moratorium only strictly applied to BCL, not other potential operators.

The moratorium is a dramatic turnaround in policy from the ABG, which determined people felt BCL didn’t deserve a social licence to run the mine.

The ABG owns a 36.4% share in BCL, and has consistently said reopening Panguna was essential for the island’s economic self-sufficiency if it is to become independent.

Luke Fletcher, the executive director of an Australian-based NGO, Jubilee, said it wasn’t clear if the turnaround was “a temporary retreat or a permanent change of direction”.

“It could be they’re just biding their time for another couple of years, or they’re considering opening Panguna with other operators,” Fletcher said. “It does seem the intention is still to reopen the mine.”

The Papua New Guinea government is the only other major shareholder after Rio Tinto left in 2016. It has said it will give its 17% share to Bougainville, making the ABG majority shareholders of a company that has just one project – a mine over which the ABG has now placed a moratorium.

BCL is yet to be officially informed of the moratorium, but learned of it through media reports.

The company’s Port Moresby general manager, Mark Hitchcock, said it had sought further clarity, as it still “firmly believed” it had strong support among landowners.

“Hitchcock said previously held community forums led by the ABG had also demonstrated strong majority support and this reflected the company’s own experiences on the ground,” a spokesman told Guardian Australia.

“He stressed that BCL was a local company majority owned by the people of PNG, including Bougainville and had always acted in good faith after being invited to enter a new process for the redevelopment of Panguna by the ABG and landowners.”

BCL claimed it had support from eight of the nine landholder groups, as well as the Special Mining Lease Osikaiyang Landowners Association. It said minority elements – and competing mining interests – were disrupting consensus.

There were disputes with the association’s chair, Philip Miriori, BCL said, citing a letter from 367 authorised customary heads who disputed Momis’s characterisation of the vote as a “narrow divide”.

The customary heads told PNG’s Post Courier the meeting was given a submission signed by 320 of the heads giving their support to BCL.

As the resource-rich country moves on from civil war and towards independence, it is increasingly looking to mining for its economic future.

West Australian company Kalia Ltd recently announced it had signed a land access agreement with north Bougainville landowners, allowing the start of a “full-scale exploration program”.

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