BHP Abandoning Ok
Tedi - PNG to clean up
by Fran Molloy 3rd October
2001
Australian mining giant BHP- Billiton announced last Thursday
that they are likely to pull out of the controversial OK Tedi
Copper mine in Papua New Guinea in January 2002.
Papua New Guinea's National Executive Council has approved heads
of agreement which will limit the mining company's future liabilities
for the environmental mess left by the mine, in return for the
transfer of BHP's 52% interest in the mine to the PNG government.
The PNG government holds a 30% stake in the mine already. The
minority partner, Canadian mining company Inmet Mining, with 18%
of the ownership, have indicated that they will continue their
involvement.
Although the agreement has not been publicly released, it is
generally thought that BHP proposes to limit any future liability
arising from the operations of the Ok Tedi mine. The agreement
has not yet met with cabinet, parliamentary, landowner or even
BHP-Billiton Board approval.
However local landowners are unhappy with the deal, and those
who had previously supported the continuation of the mine are
now angered by the arrangements.
Western Province landowner Rex Dagi was critical of BHP's decision
to leave PNG.
"I think that the mine should not be closed .. because after
all if they close the mine, we’ve lost our incomes ... but the
shareholders, the responsible people, they should clean up the
environment, and rehabilitate and restore the life of the people
... at this point in time, I don’t think the mine should be closed
... what I think they should do now is pay to clean up the environment."
Dagi started work as an apprentice at Ok Tedi Mining Ltd "many
years ago," but has left the company and is now pursuing legal
action against them.
The mine has been one of the company's most infamous operations,
with an estimated average of 80,000 tonnes of mine waste dumped
directly into the Ok Tedi river each day since the mine commenced
operation around 1984.
The history of BHP's operations at Ok Tedi date from 1976, when
an act of Parliament in PNG led to the formation of an international
consortium to develop a gold and copper mine. The mine construction
began in 1981, took almost eight years, and cost US $1400 million,
according to a report by Ok Tedi Mining Ltd.
A Four Corners report in April 2000 stated that the Ok Tedi mine
has extracted an estimated $A 8 billion in gold and copper over
its life. However, BHP’s media relations manager, Mandy Frostick,
denied that the returns from Ok Tedi had been lucrative for BHP,
citing BHP’s own discussion paper on Ok Tedi, which reports that
BHP’s return on
equity invested has been $ US 66 million pre tax - or approximately
$ A 132 million. "This represents a very poor return over the
investment period," states the report.
In June this year, several PNG landowners met with a number of
Australian politicians, including Environment minister Robert
Hill, to ask the Australian government to guarantee the clean-up
of the OK Tedi river should BHP walk away. While no agreements
were made, the visit raised expectations that Australia should
encourage BHP to take responsibility for the damage caused in
PNG.
The collapse of the mine's only tailings dam (which minimises
the impact of waste sediment to a river) occurred in 1983, before
it was even completed. An agreement between the mining company
and the PNG government saw the mine commenced operation without
a tailings dam, which was counter to common mining practices across
the world. This was also despite objections from the government’s
own advisers.
The mining giant never installed a dam, and waste sediment continued
to flow directly into the river for 14 years, before a 1996 legal
battle resulted in a river dredging operation, which did not begin
until 1998.
Environmental damage has been massive. "There’s a lot of dissolved
heavy metals that’s captured into the food chain," said landowner
Reg Dagi.
The damage has destroyed food sources, fisheries and forests.
The mining company’s own estimates suggest that more than 1350
square kilometres of land along the Ok Tedi and Fly rivers will
be affected by vegetation dieback as a result of the river pollution;
other estimates put the figure closer to 2700 square kilometres.
Even travel along the river, previously a major transport route,
has become dangerous, with sediment and mine waste spilling over
to riverbanks.
The most serious impact of the mine - the potential for acid
drainage into the river and surrounds from the spoil disposal
sites for dredged material - has not been studied comprehensively,
although has been floated as a concern by the World Bank’s 1999
report.
The World Bank’s Risk Assessment report commented on reports
prepared by Ok Tedi Mining Ltd. The Bank stated that, from an
environmental standpoint, the best option is to close the mine
immediately. However, from a social standpoint, the Bank asserted
that this would result in a potentially disastrous situation because
there is no preparedness for mine closure.
Certainly, BHP is keen to wash its hands of the whole saga. BHP’s
managing director, Paul Anderson, commented in May
2000, "One lesson we've definitely learned is that we would
not get involved in a future development which was dependent upon
riverine disposal of waste."
"Given Anderson's comments you would expect that either the mine
would close or prior to exiting the project BHP would have stopped
riverine tailings disposal and instituted a massive rehabilitation
program to continue well after the mine closes," said Nick Styant-Browne,
a partner with Melbourne law firm Slater & Gordon.
"If there were a new owner taking over, in the same way if you
were moving out of a house you would clean up and put things in
order before you left. That in simple terms is what the landowners
want BHP to do before BHP leaves the mine."
In August, Victoria's Supreme Court ruled on a cut-off date of
January 7th 2002 for over 30,000 Papua New Guinean landowners
to choose to participate in a class action against BHP run by
Slater & Gordon.
Rex Dagi is one of the principals in the class action. "They
wanted to get into the rehabilitation program - [dredging] - and
keep on dumping the tailings into the river system — I am opposing
that."
The landowners are sueing BHP and OTML for allegedly breaching
a 1996 out-court-settlement by continuing to pour tailings and
residue directly into the OK Tedi and Fly Rivers, and failing
to implement a tailings mitigation system. They claim that BHP
and OTML should have built a pipeline to stop the tailings entering
the river.
The class action will seek compensation for the extra damage
caused to the river and adjacent land.
BHP and OTML point to the Bige dredge operation, which commenced
dredging sediment from the river bed in 1997, as evidence that
they have fulfilled their contractual obligation.
However, the landowners contend that the dredge operation was
raised at the time of settlement, as a rehabilitation measure
that would be implemented in addition to a mitigation measure
to stop tailings from entering the river. No mitigation measure
has been put in place, claim the landowners.
A group of villagers who earlier refused to join the class action
with Slater and Gordon signed an agreement with Ok Tedi Mining
Ltd, in April 2001 supporting the continuance of the mine's operations
until 2010, the estimated life of the ore reserves. Two of the
signatories, Alex Maun and Moses Oti, were plaintiffs against
OTML in a 1996 action seeking compensation for environment damage.
They stated that key incentives to sign were the mine's delivery
of essential services and infrastructure and the possibility of
compensation for permanent environmental damage. However, these
villagers are reportedly very disappointed by BHP’s proposal to
transfer the 52% ownership over to the PNG government.
"What they expected from BHP was that they would transfer the
52% over to the affected landowners as compensation for damages,
and then for the mine to continue. But .. it will be transferred
into another company, which will be then controlled by three directors
of old BHP and three directors of the government of Papua New
Guinea," said Rex Dagi.
The villagers who had signed the pledge supporting the mine’s
continuation were expecting a commitment to clean up, or at least
compensate towards a clean-up, the river. The "gift" of BHP's
equity to the landowners will be shared with OTML management and
the rest of PNG leaving the landowners with only 36% of share
income, which will not go far towards rehabilitating the river
and surrounding areas.
"Given that the PNG Government already receives share income
and other mine related revenue, there is a sense amongst landowners
that once again the same landowners who have had to endure the
effects of riverine tailings disposal for the past 17 years and
the expected further damage from for another 9 years will once
again be the sacrificial lambs for the benefit of the rest of
Papua New Guinea," said Nick Styant-Browne
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