Papua New Guinea’s Government has taken full ownership of the Ok Tedi Gold-Copper Project after a drawn out dispute with a development fund which controlled the majority stake on behalf of residents in the area.

In September PNG’s parliament legislated for the government to take full ownership of the project and to remove a 12-year-old immunity deal for Ok Tedi’s former owner, BHP Billiton, for environmental damage in the Western Province.

Prime Minister Peter O’Neill told parliament, “The government in 2001 made a very bad decision in granting immunity to a corporate giant, preventing its own people from exercising their right under law to sue for permanent damages done to their environment and their livelihood.”

Profits from Ok Tedi will now be available to the government to spend, rather than previous arrangements where proceeds were divided between the province and the national government.

The Ok Tedi mine has been operating since the 1980s but has been blamed for environmental damage along the Fly River because it dumped its mine tailings into the river systems. The mine is expected to keep operating for another 10 years, although its life could be extended.

In return for legal immunity, former owners BHP Billiton in 2001 divested its controlling share in the mine to the Sustainable Development Program charitable trust, which held 63% of the mine. The PNG government controlled the remainder.

The legislation means BHP could face claims from landowners over long-term environmental damage, although previous PNG governments approved the dumping of tailings into the rivers.

The changes sparked a row between Peter O’Neill and former prime minister Sir Mekere Morauta, who is chairman of the Sustainable Development Program. Mekere Morauta has criticized the government actions, accusing the government of theft, and signalling a likely court challenge. “This is very important legislation - for the first time expropriating assets without payment from the people of Papua New Guinea, not from foreigners.”

He warned that the nationalization of Ok Tedi Mining presented dangers for the country by increasing the perception of sovereign risk. He said the legislation would undermine investor confidence at a time when a number of very large investments are on the horizon. “The bills should have been circulated widely and debated fully, not kept secret and bulldozed through in one day.”

The Sustainable Development Program also controls a $1.4 billion fund, based in Singapore, which is used to promote development in Western Province.

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