MAC: Mines and Communities

BHP Billiton "done an enormous favor" by being "allowed to exit ownership of the Ok Tedi mine"

Published by MAC on 2013-01-21
Source: Postcourier, ABC News

The quote from PNG Prime Minister Peter O'Neill is telling: "11 years ago, BHP Billiton was done an enormous favour by the then PNG government and allowed to exit ownership of the Ok Tedi Mine without accepting any financial or moral, responsibility for the enormous environmental and social damage that occurred in the 20 years it operated the mine."

Some may claim it is a little late, and also question - as the company does - whether the interests of the community are really behind this move (given there is a US $1.4 billion fund composed of BHP Billiton's share, which is expected to increased to more than $3 billion by the time that the mine closes).

But it is clear there is an issue of who should really have control here. The PNG Government is right to question whether BHP should still control the board.

PM refutes claims by BHP Billiton


15 January 2013

Prime Minister, Peter O'Neill, has responded to false and misleading claims by BHP Billiton as reported in the "Australian Financial Review."

Mr O'Neill said BHP Billiton needed to get over its "colonial era" mentality, and appreciate that Papua New Guinea is an independent nation, and negotiate with Papua New Guinea in the same, mature and reasonable way numerous other Australian resource companies do.

"Instead of seeking the intervention and assistance of the Australian Government, the company should negotiate with my government, and me, as Prime Minister," Mr O'Neill said.

"The article claims that I had blocked the granting or extension of exploration licences because it would not agree with my proposals regarding the determination of the board of PNG Sustainable Development Program. This is totally and utterly false. It is just dishonest.

"BHP Billiton surrendered the licences entirely on its own accord. It did so when it made a decision early last year not to invest in Papua New Guinea - after I had personally invited the company to meet with senior Cabinet Ministers, including myself, to consider investing in PNG.

"We did everything possible to encourage the company, just as we encourage and assist other major investors all the time. They decided not to take up the offer.

"That occurred before the mid-year elections, and eight or nine months before I made my comments on Professor Ross Garnaut," he said.

Mr O'Neill said the central issue was not Professor Garnaut and his inaccurate and ill-informed comments on why I want the issues surrounding the way the board of PNGSDP is appointed to be changed.

"The central issue is this; 11 years ago, BHP Billiton was done an enormous favour by the then PNG government and allowed to exit ownership of the Ok Tedi Mine without accepting any financial or moral, responsibility for the enormous environmental and social damage that occurred in the 20 years it operated the mine," he said.

"Surely, 11 years on, there can be no reasonable case made out to justify BHP Billiton continuing to exercise effective control over the PNGSDP, and as a consequence, the Ok Tedi Mine itself.

"The claim by BHP Billiton and by Professor Garnaut that I want the PNG Government to get its hands on the funds of the PNGSDP is personally offensive. All I have sought, and will continue to seek, is negotiations that can lead to BHP Billiton ending a role that it is not justified to continue to play.

"My position is supported by my government, and I believe by the national parliament and the people of the Fly River, Western province," he said.

Mr O'Neill said BHP Billiton should reflect on the appalling environmental damage that occurred during its management of the Ok Tedi mine, and the terrible consequences for the people of the Fly River area - consequences which continue to be felt today.

"The PNG Government of the day decided just over a decade ago to legislate to allow BHP Billiton to walk away from any responsibility for the damage that was caused during its management of the mine.

"That spared the company the massive costs, and international humiliation it faced because it effectively ended compensation claims by landowners and local communities along the Fly River.

"The provisions that allowed the company to effectively control the appointment of the Board of the PNGSDP, and therefore continue its influence over Ok Tedi, were generous. There can be no justification for their continuation," he said.

"The Australian Government is well aware of the position of my government. The legislation that effectively let BHP Billiton off the hook is PNG law, not Australian law," he said.

Mr O'Neill said he rejected the claims in the article that his position was damaging the PNG investment climate.

"This is total nonsense. Last month I addressed 1,400 mining, oil and gas leaders, and financiers and analysts, in Sydney, at the annual PNG Mining and Petroleum Conference.

"At that conference, there was strong confidence expressed about PNG as a country in which to invest, and in the range of policies my government has in place, and is committed to, to give investors confidence and certainty.

"The claim that this issue has undermined confidence could not be further from the truth," Mr O'Neill said.

Documentary Special: The Ok Tedi Mine in Papua New Guinea

PM programme, ABC News

3 January 2013


SIMON SANTOW: Papua New Guinea's huge Ok Tedi gold and copper mine used to be a name synonymous with environmental disaster.

Hello I'm Simon Santow and this is a Radio Current Affairs documentary.

It is now more than a decade since BHP Billiton, the company responsible for the damage, pulled out leaving its shareholding to the people of PNG. Since then Ok Tedi Mining Limited has remade itself. It's spent more than a billion dollars on environmental remediation and has just put a plan to landowners to extend the mine life to 2025.

Jemima Garrett visited Papua New Guinea for this report.

(Sound of heavy trucks)

JEMIMA GARRETT: The Ok Tedi mine in the remote Star Mountains, near PNG's border with Indonesia, sits in the head waters of the Fly River.

There are 1,000 kilometres of waterways between here and the Torres Strait, waterways that cut through some of the richest rainforest on the planet.

Tens of thousands of people rely on riverbank food gardens and fish for their livelihoods.

(Sound of heavy trucks)

BHP opened the Ok Tedi copper gold mine in 1982.

During construction Ok Tedi's tailings dam failed. The company made the fateful decision to put all its waste directly into the creeks that run into the Ok Tedi and Fly Rivers.

By the 1990s hundreds of millions of tonnes of waste clogged those waterways, destroying thousands of hectares of forest and inundating villages and vegetable patches.

(Sounds from the village)

Kurina Aioge is from the heavily affected Middle Fly area 200 kilometres downstream from the mine.

KURINA AIOGE: The environment that is around the Fly River is just dying off. We have plenty of dieback. If you go along the Fly River you see the trees are all dying, that we call it dieback.
Most of my life I live at the Fly, getting fish and also we live on sago. The sago swamps all died off.

JEMIMA GARRETT: As the mine's impact grew, environmentalists became enraged and landowners took legal action.

At first BHP denied there was a problem, but as the damage to its reputation mounted, it became clear that was no longer viable.

(Archival excerpt from Four Corners)

PAUL ANDERSON: We're not comfortable with our role as operator of that mine.

ANDREW FOWLER, ABC REPORTER: After two decades, BHP wants out from its huge gold and copper mine at Ok Tedi in Papua New Guinea.

What it's not comfortable with is the huge scale of environmental damage this mine has caused.

(end excerpt)

JEMIMA GARRETT: Media exposes by Four Corners and others were the final straw. BHP wanted to close the mine.

But the PNG government didn't. Ok Tedi was the only source of income for many landowners and the lynch pin of the economy, contributing a massive 10 per percent of gross domestic product.

A deal was stitched up for the mine to stay open. BHP would be protected from future legal claims. In return it gave all its shares to the people of Papua New Guinea.

Those shares are held in a Singapore-based company, PNG Sustainable Development Program Limited - a trust with a mission to provide development projects in Western Province, where the mine is located, and across PNG.

At the beginning of 2011 the last foreign investor sold out, leaving the provincial and national governments and the PNG Sustainable Development Program as the only shareholders.

Ok Tedi Mining Limited CEO, Nigel Parker, says his company's mandate is unique.

NIGEL PARKER: It's very much an interesting position because we now have a full social mandate. When BHP exited we still had Inmet as an 18 per cent shareholder and there was a mix of the commercial mandate with social mandate.

Inmet were very good in the social mandate side of it but now Inmet has exited it is full social mandate so everything we do has a focus on the Papua New Guinean people, what we can deliver to the economy, to the peoples of the Western Province, and of course to a wider group of people that are not just impacted by the mine.

JEMIMA GARRETT: Western Province is the poorest and least developed of all PNG's provinces and it has suffered from poor administration.

In elections in July, the straight-talking Australian-trained economist, Ati Wobiro, won the crucial role of governor.

Mr Wobiro sees Ok Tedi as a vital development partner.

ATI WOBIRO: For us in the Western Province we see it as a golden goose. It is there to now help us. Ok Tedi has contributed a lot over many years but particularly now, now that the Ok Tedi mine is 100 per cent owned by Papua New Guinea, and a major part of that belongs to people of the Western Province.

So people like myself who are in leadership are challenged to ensure that that money is translated into sustainable development and that is what I am focussed on. It is an exciting time for me to come into politics and I know why I have been elected to office and I'll ensure that I deliver.

JEMIMA GARRETT: Since BHP left, Ok Tedi Mining Limited has spent over a billion dollars on environmental remediation, much of it to tackle the vast quantity of mine tailings that still go into the river.

It is the tailings, made up mostly of sand and silt, that kill forest and food gardens. Almost twenty million tonnes of this waste goes into the fast flowing mountain streams of the Fly River system each year.

(Sound of children playing in water)

Downstream at Bige, where the river widens out on the floodplain, Ok Tedi is attempting to reduce the mine impact with a round-the-clock dredging program.

OTML's environment managers, Michael Ridd and Sean De Witt, showed me round the remediation site.

Sean we are looking here at the big dredge that takes the sand out of the river. What is it doing exactly and how much sand is churning through there?

SEAN DE WITT: It is basically acting like a very large vacuum cleaner. It has got a large suction pump which sucks in the sand. It has also got what they call a cutter, which is basically just a, sort of like a whisk with teeth and it whisks up the sand and cuts into the sand and sucks up the sand through the pump and pumps it ashore.

JEMIMA GARRETT: Michael, OTML has spent a billion dollars in the last 10 years on environmental remediation. What have you spent it on?

MICHAEL RIDD: Basically on two major projects. The first is the dredging operation which costs us of the order of $60 million or so every year but then in addition we've spent at least $300-400 million on capital on the mine waste tailings project to remove pyrite from tailings.

JEMIMA GARRETT: We are looking at the dredge here in front of us, just how much sand does that dredge take out of the river every year?

MICHAEL RIDD: It is taking about 17 million tonnes of sand every year.

JEMIMA GARRETT: That's a phenomenal amount. What do you do with it?

MICHAEL RIDD: It's been stored in engineered stockpiles on either side of the river and they will subsequently be revegetated.

JEMIMA GARRETT: The dredging program is part of the settlement of court action brought by landowners against BHP.

Removing the pyrite from the tailings reduces the risk of acid rock drainage and the release of copper into the environment.

Dr Gavin Mudd is a lecturer in Environmental Engineering at Monash University and chair of the mining watchdog, the Minerals Policy Institute.

He says the damage done by the Ok Tedi during the BHP era is one of the worst environmental disasters in the history of mining.

GAVIN MUDD: There is only really about one mine that I would consider worse in its scale of impacts than Ok Tedi and of course that is the Grasberg or Freeport deposit or mine just across the other side of the border into Papua Province in Indonesia.

At least the better transparency that has come about since BHP has left I think allows us to start looking at some of the data and some of the monitoring and so on that is available from Ok Tedi

JEMIMA GARRETT: That data shows copper levels have dropped significantly since Ok Tedi began its remediation program, but Gavin Mudd says more can be done.

GAVIN MUDD: When you're looking at the concentrations of the water in the Fly, because it is a large volume, the concentrations are low but they're certainly above the normal levels we would want to see to protect things like either fresh water or marine water.

And just to use some numbers to help make that point, if you are wanting to protect say 99 per cent of species, the Australian Water Quality Guidelines for Freshwater Ecosystems would like to see a value of one microgram per litre of copper. Now some of the concentrations that are regularly being measured on average in the Fly are around about 10.

Now drinking water standards are generally 1,000 micrograms per litre of copper. So in that sense, that is where you can see the numbers where you can say well it is below the drinking water guidelines but it is certainly that value, that average value of 10 is still certainly above the values we would like to see to protect freshwater ecosystems and the biodiversity that you find in fresh water ecosystems.

JEMIMA GARRETT: Some people are still scared to drink the water and eat the fish from the Fly River but they have no choice.

Ok Tedi's environment manager Michael Ridd says they should not be worried.

MICHAEL RIDD: There is no human health effect or risk associated with drinking water at around 10 micrograms per litre. In fact if you've got copper pipes in your taps you may well have significantly higher copper concentrations than 10 micrograms per litre.

JEMIMA GARRETT: The copper does affect the aquatic life. What impact is it having up the food chain, into things like the fish?

MICHAEL RIDD: Right. We are required by the state to monitor copper concentrations and other elements in fish. They remain well below those that are a risk to human health. There is some evidence of increases in copper concentrations, particularly in some of the organs like kidneys or liver, but they are not high enough to be a significant risk to the communities who eat a lot of fish.


JEMIMA GARRETT: The Ok Tedi mine is due to close in 2015 but management has put forward a plan to extend the mine life to 2025. For that it must get approval from landowners and from the Papua New Guinea government.

Ok Tedi CEO, Nigel Parker.

NIGEL PARKER: We have quite a substantial amount of ore still available in the pit that we currently operate and we are firmly of the view that we can continue mining for at least another 10 years on quite easily accessible ore in the existing open pit mining methodologies, with a little bit of underground.

The underground is of interest to us, of course, because it will develop expertise within the Papuan New Guinean workforce and going forward into new mines and new mining companies would be looking very much towards underground mining because of the lesser environmental impact that that would have on the operations.

JEMIMA GARRETT: One of the community leaders Ok Tedi must win over if its mine life extension plan is to be viable is James Assan.

After a lifetime spent working in other parts of Papua New Guinea he recently returned to his village of Kokonda, one of the areas hardest hit by sediment pollution.

JAMES ASSAN: Most of the vegetation along the river has gone. It is very evident.

Our land, our customary land is along the Ok Tedi River and after leaving home for about 33 years I came back in 2009. There was a big, big, big difference and I even cried. I went through my land along the river and I just shed tears.

JEMIMA GARRETT: For most of the more than 70,000 people living along the Ok Tedi and Fly Rivers compensation and royalties paid by Ok Tedi Mining Limited are their main source of income.

Many vital services, from mobile phone towers to health and education, are not provided by the PNG government but by the mine or by its biggest shareholder, the PNG Sustainable Development Program.

James Assan believes the mine life should be extended.

JAMES ASSAN: I personally think the mine should continue. That is my own personal feelings. You see, the thing is the government has put in very little, very little in terms of the livelihoods of the people. And I think it is true to say that Ok Tedi is more than a mine and I think Ok Tedi has done that.

JEMIMA GARRETT: When you say Ok Tedi is more than a mine, what do you mean?

JAMES ASSAN: In terms of services, infrastructure developments, where the government should have provided that infrastructure but there is nothing there. So Ok Tedi more or less played the role of the government here in the Western Province.

JEMIMA GARRETT: Since the July elections Papua New Guinea's new generation of political leaders has been keen to take control of the development process.

Ati Wabiro, governor of the Western Province, moved quickly to call a meeting with Ok Tedi and its partners to map out a new way forward.

ATI WABIRO: Two weeks after I was declared I got all the development partners together and we entered into a MoU (memorandum of understanding) committing ourselves to work together. And my challenge to the development partners was that I understood that political leadership was not there in the past but with me I am now reaching out to them and I am asking them to come and partner with me.

And I made the statement that on my own, provincial government, I cannot deliver the kind of services our people want. Ok Tedi and PNG Sustainable and Ok Tedi Development Foundation and other NGOs, even you know AusAID, we've invited them to come along and work together and I know that with this teamwork we are going to deliver.

JEMIMA GARRETT: The PNG prime minister Peter O'Neill is also taking more control. In September that led to a spat with BHP Billiton, which saw Australian economist, Ross Garnaut, banned from the entering the country.

As a legacy of its former ownership of Ok Tedi, BHP Billiton controlled three board positions, including the chairmanship, of the PNG Sustainable Development.

Prime minister O'Neill said it was time for BHP Billiton to get out.

PETER O'NEILL: BHP should take its leave at some stage. I'd rather it be sooner than later. BHP has to learn that it has to move on.

JEMIMA GARRETT: After Mr O'Neill made those comments, Ross Garnaut retired as chair of PNG Sustainable Development in favour of former prime minister Sir Mekere Morauta.

But Professor Garnaut had made remarks that angered Mr O'Neill who vowed not to let him back in until BHP Billiton relinquished control of board appointments.

Mr O'Neill made his terms clear.

PETER O'NEILL: Papua New Guineans are now capable of managing their own affairs. We don't need to be managed, the affairs of some of our activities like Sustainable, to be managed on our behalf from Melbourne.

We believe that it is time that after 10 or 12 years now of Sustainable being in operation they relinquished the management of that to a Papua New Guinean-based, Papua New Guinean-run organisation.

JEMIMA GARRETT: In October BHP Billiton gave control of the controversial positions to PNGSDP's (Papua New Guinea Sustainable Development Program) board itself but that has not been enough to satisfy Mr O'Neill and Professor Garnaut remains banned.

Meanwhile PNG's influential young generation of social media-savvy activists says Ok Tedi's new found transparency is overrated.

Effrey Dademo, executive officer with Act Now, says with so many other new resource projects coming on stream, PNG should not be rushed into extending the life of the Ok Tedi mine.

EFFREY DADEMO: There is really not enough information going around as to what either the government or the company is doing about the ongoing environmental damage. So basically here at Act Now our position is that if the government is going to, is really serious about extending the life of the mine, there are certain things they need to do before that and one of which is we are saying there should be a full inquiry into the ongoing damage plus a reality check on how Western Province has benefit over the past years.

JEMIMA GARRETT: In the past 22 months, Ok Tedi has held hundreds of village meetings to consult the tens of thousands of downstream landowners who must give permission if the mine life extension is to go ahead. By mid-December, seven of the nine communities had signed up, and the remaining two are in the last stage of negotiation.

The stakes are high. In 2011, Ok Tedi provided 16 per cent of the PNG government's non-aid related revenue.

CEO Nigel Parker has plans well beyond mine life extension.

NIGEL PARKER: This is a highly valuable company, just its structure, its employee base, its systems, its processes, the skills that we have with our Papua New Guineans and it is, just five years ago, Ross, Professor Garnaut and I had this very discussion as to it would be a great shame if we simply sat back as management and the board and let this company wither.

JEMIMA GARRETT: Ok Tedi has taken a stake in a new gold and copper resource 20 kilometres from its existing mine. It could have significant implications for pollution in the Fly River.

NIGEL PARKER: We could look to bring ore quite easily from those resources and process them through our existing facilities here and use the existing infrastructure down through the Ok Tedi and the Fly River systems as opposed to taking them out to the pristine environments on the other side through the Sepik River etc.

JEMIMA GARRETT: Papua New Guinea is one of the few countries in the world that still allows riverine dumping of mine tailings.

When Ok Tedi's tailings dam failed in the early 1980s the company said it was too difficult to rebuild. It was that decision that caused the environmental damage we now see in the Fly River.

Gavin Mudd says technology has changed since then. He's urging the PNG government to make a tailings dam a condition for mine life extension.

GAVIN MUDD: It is just a matter of doing the thorough engineering investigations, making sure you can find an appropriate site that can withstand things like earthquake risk, design it properly to account for rainfall.

Engineers know how to do these things so I think that would be one of the conditions that might be put on a mine life extension and that way it basically shuts off discharge of mine waste into the Fly River.

JEMIMA GARRETT: The feasibility study for the mine life extension has gone to the PNG government.

Prime Minister, Peter O'Neill, is not willing to get into specifics about conditions that might be placed on the plan but he is likely to approve it.

PETER O'NEILL: We want to do it in a manner that is acceptable to everybody, particularly on the environment, making sure that we do not cause further damage to many of the environmental issues within the Western Province.

But all in all I want to say this: Ok Tedi continues to be a good producing mine, not to the level that we have experienced in the past, but I believe it will continue to serve our country for a few more years.

JEMIMA GARRETT: The environmental safeguards on Ok Tedi may be as important to Australia as they are to PNG. The mouth of the Fly River opens directly onto the Torres Strait and the waters around Cape York.

Prime Minister O'Neill has shown a willingness to look at the issues but he is yet to establish an environmental track record.

SIMON SANTOW: Jemima Garrett reporting from PNG. You've been listening to a Radio Current Affairs documentary.

Home | About Us | Companies | Countries | Minerals | Contact Us
© Mines and Communities 2013. Web site by Zippy Info