Ok Tedi – separating fact from fiction

By Peter O’Neill
CMG, MP, Prime Minister
The attempts by certain influences, and a small section of the media, to justify a continued role for BHP Billiton in the operation of the Ok Tedi gold and copper mine, and the PNG Sustainable Deve­lopment Program (PNGSDP) have sunk to a new low in desperation and credibility.
The time has come for the facts surrounding the ending of the then BHP’s ownership of the mine to be fully and frankly outlined – and the nonsense being peddled put to rest forever.
Recently, the Sydney Mor­ning Herald finance columnist, Michael Pascoe, offered a truly bizarre justification for BHP’s past and current roles in Ok Tedi and PNGSDP.
He wrote that the establish­ment of the PNGSDP, for which he credited BHP, was “by far the biggest act of corporate philanthropy (which is defined as caring, nourishing, advancing what it is to be human) in Australian history!
The history of the Ok Tedi mine is simply one no PNG government since the mine began operations in the early 1980s can be proud of.
And nor can BHP be proud of its majority ownership and managerial control prior to 2002 when it divested itself of its majority shareholding, and pretended – and I use the word advisedly – to end its control over the mine.
The establishment of the PNGSDP was designed by BHP to keep control of the mine, and the direction of its profits, principally through the PNG Sustainable Develop­ment Fund (PNGSDF), over which it clearly exercised effective control.
This is defined by Mr Pascoe, and others as an act of extraordinary gene­rosity – the most gene­rous in the long and proud history of corporate charity and generosity in Australia.
But what Mr Pascoe conveniently overlooked are a couple of indisputable historic facts.
The first is that new mana­gement at BHP in the period prior to 2002 wanted to close the mine because it’s appal­ling environmental and social damage history, and because that history was attracting the most adverse regional and international media and other attention.
It was common know­ledge at the time that the company imminently faced damages and compensation claims that would run into billions of dollars, would tie BHP up in the courts for years, and damage, if not wreck, its international corporate standing.
Closing the mine down, regardless of what that would cost the local workforce, and small business, and the national budget given that the mine was the largest source of revenue at the time, presented a challenge for the PNG go­vernment at that time.
The response of the then Morauta government was to give legislative approval to the future structure BHP insisted on, a structure which would allow BHP to exercise effective control over the mine’s revenue flows for as long as the mine continued operating.
But that was not the end of the story.
BHP demanded more, and what BHP demanded, the then government simply delivered.
Firstly, BHP insisted that the funds managed by PNG­SDP – the mines profits – be located in Singapore and ma­naged out of Singapore, denying PNG significant taxation and other revenue.
That was a vote of no-confidence in PNG, and was a reflection of the “colonial era” mentality that existed in BHP then, and clearly exists in BHP Billiton today.
The decision by the PNG government of the day to meekly agree to BHP’s conditions was unfortunate.
I was not in parliament at the time. Had I been in parliament, I would have expressed reservations – if not opposed the whole proposal completely.
But it gets much, much, worse…
One of the conditions BHP insisted on was that the parliament of PNG pass watertight laws that would totally, and forever, grant to BHP an immunity from criminal or civil court action arising from the pollution and other damage caused by the mine’s activity.
The then government agreed and the 1997-2002 parliament gave BHP the total and unqualified immunity it demanded.
That decision almost certainly spared BHP, and other partners in the mine, years of costly, and very damaging court cases, and compensation payouts and other penalties that would have run into billions of kina, and perhaps many billions of kina.
BHP was effectively given a pardon by the government and parliament of PNG … a pardon for years of appalling mismanagement that ruined the lives, and the livelihood, of tens of thousands of village communities along the Fly River.
The question which Mr Pascoe should be asking is whe­ther the parliament of PNG failed in its duty to the people of PNG, and the people of the Fly River in particular, by gi­ving Ok Tedi a pardon from any court action no matter how overwhelming the case against BHP might be.
Instead of claiming BHP is entitled to almost hero status, he should be asking whether justice and fairness prevailed – and also who got the best out of the “deal” done by BHP with the then government.
In my view, and in the view of my government, and I believe the view of the people of PNG, BHP was treated with extraordinary generosity. I am in no doubt it got the best deal, and it got it by a long way.
You would have thought BHP would have breathed a corporate sigh of relief  when the then PNG government gave it everything it wanted, and an unqualified immunity in particular.
But no, it wanted more – and it still wants more.
Even though BHP effectively had no equity in the mine after 2002, it effectively controlled the mine’s management, and operations, both directly and indirectly through the PNGSDP.
It controlled the board of PNGSDP – by appointing the chairman, and a majority of the board. And its control of PNGSDP gave it effective control over Ok Tedi, the majority shareholder in which is PNGSDP.
And it insisted PNGSDP’s funds be held in Singapore, and not in PNG.
The claim that BHP, and more recently BHP Billiton, has no say in the running of Ok Tedi and PNGSDP is just not true. It might be an “indirect” say, through a myriad of structures, but it has not just been an effective say, it has been and remains, effective control.
The leases relating to the Ok Tedi mine area end next year.
Under PNG law, and long established law, the state owns the nation’s mining, oil and gas resources.
It grants leases to companies to develop these resour­ces.
When the term of a lease expires, the state can extend it or it can cancel it.
What I have simply said, and what the National Parliament AND the landowners of the Ok Tedi mine area strongly support is that when the lease expires, the national government will put in place management arrangements that end any secret arrangements, and ensure that the people of PNG, including the local landowners, have a say in the mine’s future and its management.
And we will ensure the PNGSDP is managed in PNG and its funds are held in PNG, and used transparently for the good of the people of the Wes­tern and the nation gene­rally.
The campaign by vested interests and their barrackers to portray the government’s commitments as being dangerous, and worse, will not succeed.
Nor will the desperate attempts to rewrite the history of BHP’s management of the mine – and the tragic consequences its management for tens of thousands of innocent Papua New Guineans.