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TABLE OF CONTENTS
List of tables and figures vi
Abbreviations viii
Currency conversion table ix
Acknowledgments (persons consulted) x
Disclaimer x
1 Introduction
1.1 Scope of this study 1
1.2 Definitions of ‘compensation’ and ‘benefits’ 1
1.3 Previous initiatives to deal with compensation issues 3
1.3.1 Policy reform under the Namaliu government, 1988-92 3
1.3.2 Policy reform under the Chan-Haiveta government, 1994-97 6
1.3.3 Policy reform under the Skate government, 1997-98 7
2 PNG government legislation on compensation
2.1 Mining and petroleum compensation agreements 8
2.2 Compensation under the Land Act 9
2.3 Agreements under the Water Resources Act 10
2.4 Rivers, waterways, and the seabed 11
2.5 The Criminal Code 13
2.6 The liability to compensation 13
2.7 Determination of compensation and dispute resolution 13
3 The Valuer-General’s Guidelines
3.1 Background and scope 16
3.2 Values 17
3.3 Industry, DMR and DPE attitudes 18
3.4 Field application 20
4 The role of government officials in the mining and petroleum sectors
4.1 Perceptions of the role and performance of government 23
4.2 The role of the DMR 27
4.3 The role of the DPE 29
4.4 The role of other government bodies 32
ii
5 Compensation in the prospecting or exploration phase
5.1 Compensation agreements 34
5.2 The exploration paper trail 35
5.3 Compensation payments in petroleum exploration 35
5.4 Compensation payments in mining exploration 37
5.4.1 Case Study: Lihir (1983-1985) 37
5.4.2 Case Study: Wafi 39
5.4.3 Case Study: Mount Kare 40
5.5 Variations in practice 41
5.6 Social mapping 42
6 Compensation agreements between developers and landowners
6.1 Development of the Panguna compensation regime (1967-1980) 43
6.2 Development of the Ok Tedi compensation regime (1976-1985) 46
6.3 Misima Compensation Agreement (May 1987) 47
6.4 Porgera Compensation Agreement (January 1988) 49
6.5 Tolukuma Compensation Agreement (November 1993) 50
6.6 Lihir Integrated Benefits Package (April 1995) 53
6.6.1 Main Compensation Agreement 54
6.6.2 Londolovit Township Agreement 56
6.6.3 Londolovit Settlement Agreement 57
6.6.4 Putput Settlement Agreement 57
6.7 Further development of the Ok Tedi compensation regime (1990-1997) 58
6.7.1 Ok Tedi/Fly River Development Trust 58
6.7.2 Highway Village Development Programme 59
6.7.3 Restated Eighth Supplemental Agreement 59
6.7.4 Lower Ok Tedi Agreement 60
6.7.5 New agreements with upstream landowners 61
6.8 Development of Chevron’s compensation regime (1990-1997) 62
6.8.1 Original Kutubu Agreement 62
6.8.2 Gobe and Moran 64
6.8.3 Mendi Accord (October 1997) 65
6.9 Development of the Hides Gas compensation regime (1990-92) 66
iii
7 Relocation and community development agreements
7.1 Bougainville and Ok Tedi 69
7.2 Porgera Relocation Agreement (September 1988) 69
7.3 Tolukuma Compensation Agreement (November 1993) 71
7.4 Lihir Integrated Benefits Package (April 1995) 71
7.4.1 Relocation agreements 72
7.4.2 Putput Community Agreement 75
7.4.3 Other community development benefits 76
8 How developers organise delivery of compensation and landowner benefits
8.1 Panguna 79
8.2 Ok Tedi 79
8.3 Misima 80
8.4 Porgera 81
8.5 Lihir 82
8.6 Kutubu and Gobe 83
8.6.1 Gobe construction period delivery of benefits 83
8.6.2 The restructure of CNPL External Affairs 86
9 How much developers have paid in compensation and landowner benefits
9.1 The problem of comparison 87
9.2 Panguna (1969-1989) 88
9.3 Ok Tedi (1982-1997) 90
9.4 Misima (1987-1996) 91
9.5 Porgera (1987-1996) 93
9.6 Tolukuma (1994-1997) 96
9.7 Lihir (1995-1997) 97
9.8 Petroleum projects 100
10 Socio-economic impact of compensation payments and landowner benefits
10.1 Panguna (1969-1988) 102
10.1.1 Impact of compensation 102
10.1.2 Impact of relocation 105
10.2 Misima (1988-1992) 106
10.3 Porgera (1988-1997) 107
10.3.1 Impact of compensation 107
10.3.2 Impact of relocation 108
iv
10.4 Ok Tedi (1990-1997) 109
10.4.1 Lower Ok Tedi/Fly River Development Trust 109
10.4.2 Restated Eighth Supplemental Agreement 110
10.5 Lihir (1995-1997) 111
11 Provision of compensation and landowner benefits by government agencies
11.1 Department of Transport and Works (DTW) 112
11.2 Electricity Commission (Elcom) 113
11.3 Telikom 113
12 Conclusions and recommendations
12.1 Guidelines for the prospecting or exploration phase 116
12.1.1 Compensation format 116
12.1.2 Compensation categories 116
12.1.3 Compensation amounts 116
12.1.4 Local authorities 117
12.1.5 Significant sites 117
12.1.6 Preservation of data 117
12.1.7 Social mapping studies 118
12.2 Guidelines for the development and production phase 118
12.2.1 Data handling 118
12.2.2 Strategies for dealing with internal community disputes 118
12.2.3 Compensation investment advice 119
12.2.4 Maintenance of community infrastructure 119
12.2.5 Guidelines for grants and donations 119
12.3 The role of government 120
12.3.1 The Valuer-General 120
12.3.2 Principles of compensation 120
12.3.3 Development Forum 121
12.3.4 DPE Coordination Branch 122
12.3.5 DMR Coordination Branch 123
12.3.6 Other government departments 123
12.4 Joint training proposal 123
v
Bibliography
Mainstream publications 125
Baseline resource/land use studies 130
Social mapping and landowner identification studies 131
Socio-economic impact assessment studies 132
Socio-economic impact monitoring studies 133
Unpublished conference papers 135
Other works cited in the text of this report 137
Appendices
1 Terms of reference 139
2 Mining Act, Part VII 142
3 Petroleum Act, Division 7 145
4 Oil and Gas Act, Division 12 151
5 Social mapping and landowner identification 159
6 Access to waterways: summary of some relevant legislation 163
7 History of compensation rates for economic plants 165
8 Ranked actual and extrapolated payments per hectare for bush clearance 170
9 Compensation survey, Questions 1-15: analysis of responses 173
10 Compensation survey, Questions 16-17: analysis of responses 181
11 Compensation guidelines 194
vi
LIST OF TABLES AND FIGURES
Tables
1.1 Survey Question 1, 2 and 3 responses. 2
2.1 Compensation provisions of the Water Resources Act
and the Draft Environment Bill. 11
2.2 Compensation liability under existing legislation. 14
3.1 Valuer-General’s schedules 1988-1998, selected items (in kina) 18
3.2 Survey Question 7 responses. 19
3.3 Land and annual rental values (in kina), Hides gas project. 20
4.1 Survey Question 14 responses. 23
4.2 Survey Question 15 responses. 24
4.3 Staffing of DMR Mining Coordination Branch and Warden’s Office (1998). 27
4.4 Staffing of DPE Project Coordination Branch and Warden’s Office. 29
4.5 Percentage satisfaction ratings by government department. 32
5.1 Survey Question 9 responses. 34
5.2 Mount Kare compensation values (in kina), 1998. 41
6.1 Item-based compensation rates for the Panguna project (at 1979 prices). 45
6.2 Item-based compensation rates for the Misima project (at 1987 prices). 48
6.3 Item-based compensation rates for the Porgera project (at 1988 prices). 49
6.4 Item-based compensation rates for the Tolukuma project (at 1993 prices). 52
6.5 Compensation rates for trees and plants
specified in the Tolukuma agreement. 52
6.6 Lihir ‘block executives’, by village of origin. 54
6.7 Item-based compensation rates for the Lihir project (at 1995 prices). 55
6.8 Trust funds established by the Lihir compensation agreements. 57
6.9 Payments due under the Lower Ok Tedi Agreement (in kina). 60
6.10 Kutubu project compensation categories. 63
6.11 Current Kutubu, Gobe and Moran compensation rates. 64
7.1 Residents of the affected areas, by type of housing benefit, Lihir project. 73
7.2 Value of components of the Lihir relocation package
for the period 1995-2000, in millions of kina at 1995 prices. 75
7.3 Trust funds established under the Lihir relocation agreements. 76
9.1 Values of compensation and relocation payments
for different mining projects. 87
9.2 Values of direct community development assistance
provided by different mining projects. 87
9.3 Value of compensation payments and relocation costs
for different mining projects by lease area. 88
9.4 BCL’s annual compensation payments at the time of mine closure. 89
9.5 BCL’s village relocation costs, 1969-1989. 89
9.6 Value of compensation and direct benefits provided
to the Ok Tedi project impact area by OTML, 1982-96. 90
9.7 Lower Ok Tedi/Fly River Development Trust
expenditures in Yonggom villages, 1990. 91
vii
Tables (continued)
9.8 Annual value (in thousands of kina) of general compensation
and occupation fees paid by MMPL, 1987-1996. 91
9.9 Value of compensation and other benefits provided
to the Misima project impact area by MMPL, 1987-96. 92
9.10 PJV compensation payments made during 1992 by type. 93
9.11 Annual value of general compensation and
occupation fees paid by PJV, 1987-1996. 94
9.12 Value of compensation and community infrastructure
provided to the Porgera project impact area by the PJV, 1987-96. 95
9.13 Value of compensation and direct benefits provided
to the Tolukuma project impact area by Dome Resources, 1994-97. 96
9.14 Actual value of LMC expenditure on major items
specified in the main compensation agreement
during the Lihir project construction phase, 1995-97. 97
9.15 Actual cost of constructing relocation houses for Kapit village, 1996-97. 98
9.16 Estimated cost of constructing relocation houses
for Putput village, 1996-97. 99
9.17 Additional LMC expenditures under the
Lihir relocation agreements, 1996-97. 99
9.18 Estimated value of compensation and direct benefits
provided to the Lihir project impact area by the LMC
during the project construction phase, 1995-97. 100
9.19 CNPL’s budget for community benefits, 1998. 101
9.20 Gobe project, additional benefits during construction. 101
Figures
5.1 Ranked actual and extrapolated bush clearance
compensation payments per hectare. 36
6.1 Area-based compensation rates for the Panguna project
(kina per hectare at 1979 prices). 45
6.2 Area-based compensation rates for the Ok Tedi project
(kina per hectare at 1981 prices). 47
6.3 Area-based compensation rates for the Misima project
(kina per hectare at 1987 prices). 48
6.4 Area-based compensation rates for the Porgera SML
(kina per hectare at 1988 prices). 49
6.5 Area-based compensation rates for the Tolukuma project
(kina per hectare at 1993 prices). 52
6.6 Area-based compensation rates for the Lihir project
(kina per hectare at 1995 prices). 55
6.7 Area-based compensation rates for the Ok Tedi project
(kina per hectare at 1996 prices). 62
10.1 The social disintegration model (after Filer 1990). 104
10.2 The environmental injustice model (after O’Faircheallaigh 1992). 104
viii
ABBREVIATIONS
AGA Applied Geology Associates
BCL Bougainville Copper Ltd
BHP Broken Hill Pty Ltd
BP British Petroleum
CA Community Affairs
CMP Chamber of Mines and Petroleum
CNPL Chevron Niugini Pty Ltd
CODE College of Distance Education
CPI Consumer Price Index
DEC Department of Environment and Conservation
DME Department of Minerals and Energy
DMP Department of Mining and Petroleum (formerly DME)
DMR Department of Mineral Resources
DOW Department of Works (now DTW)
DPE Department of Petroleum and Energy
DTW Department of Transport and Works
EA External Affairs
Elcom Electricity Commission
EMMP Environmental Management and Monitoring Programme
GPS global positioning system
IBP Integrated Benefits Package (Lihir)
INA Institute of National Affairs
KRT Kapit Relocation Trust (Lihir)
LMALA Lihir Mining Area Landowners Association
LMC Lihir Management Company
LMP Lease for Mining Purposes
LOTA Lower Ok Tedi Agreement
LOTFRDT Lower Ok Tedi/Fly River Development Trust
LRC Law Reform Commission
MMPL Misima Mines Pty Ltd
MOA memorandum of agreement
MOU memorandum of understanding
MPSISC Misima Project Social Impact Study Committee
MTSA Misima Towoho Siun Association
NDA Nimamar Development Authority (Lihir)
NEC National Executive Council
NGO non-government organisation
NPC National Premiers Council
OTML Ok Tedi Mining Limited
PDL Petroleum Development Licence
PPL Petroleum Prospecting Licence
PJV Porgera Joint Venture
ix
ABBREVIATIONS (continued)
PLRT Putput and Ladolam Relocation Trust (Lihir)
PMV public motor vehicle
PNG Papua New Guinea
RESA Restated Eighth Supplemental Agreement (Ok Tedi)
RMTLTF Road Mining Tailings Leases Trust Fund (Panguna)
SEIS socio-economic impact study
SML Special Mining Lease
TIPL Tolukuma Investments Pty Ltd
VDF Village Development Fund (Ok Tedi)
VG Valuer-General
YLA Yulai Landowners Association (Tolukuma)
Currency Conversion Table
US dollars per PNG kina, 1988-98 (year end).
Year USD
1988
1.2100
1992
1.0127
1994
0.8485
1996
0.7553
1998
0.4700
x
ACKNOWLEDGMENTS (PERSONS CONSULTED)
Sections 6.6, 7.4 and 9.7 of this study have been derived from a separate consultancy
undertaken by one of the authors (Colin Filer) for the World Bank, and we should like to
acknowledge the Bank’s parallel interest in the Lihir project for enabling us to assemble this
information without additional cost to the PNG Chamber of Mines and Petroleum.
The following individuals have also been consulted in the course of this study:
Ieti Ai (DPE), Guali Akivi (CNPL), Greg Anderson (CMP), Michael Baitia (Mineral Resources
Development Company), Rodney Berapu (CNPL), Luke Blansjaar (CNPL), Laurie Bragge (Oil
Search), Ron Brew (LMC), Martin Byrnes (DPE), George Clapp (Hides Joint Venture), Mapesa
Dume (DPE), Poate Edoni (MMPL), David Ekins (Hides Joint Venture), Dave Emergy (LMC),
Gabriel Gabonen (DPE), Graham Hancock (DMR), Fred Haynes (BP Exploration), Ron Hiatt
(Placer Niugini), Saleng Hosa (Valuer-General), Ellis Illaia (MMPL), Israel Israel (MMPL),
Nelly James (DMR), Edmund Kaba (DMR), Philip Kanora (CNPL), Andrew Kealaua (Elcom),
Peter Koim (CNPL), Nick Lambert (LMC), K. Lavu (PJV), Peter Leahy (Rio Tinto), Ken
Logan (PJV), David Manau (DPE), Gordon McNeil (MMPL), Michael McWalter (DPE),
Moseley Moramoro (CNPL), Bill Muntz (MMPL), Jerry Naime (DMR), Tim Omundsen
(DMR), Abel Perinde (DMR), Jonathan Piibah (PJV), Gai Pobe (CNPL), Graham Pople (Mt
Kare Joint Venture), L. Rupa (PJV), Michael Siribis (DTW), Joseph Soloi (Valuer-General), D.
Solomon (PJV), Blasius Susafu (DMR), Marika Tako (DMR), Graham Taylor (DMR), Jack
Taylor (CNPL), Paul Tiensten (DPE), Elliot Tony (MMPL), Ian Trevitt (Barracuda), Fred
Wade (LMC), John Wagambie (CNPL), Noel Walters (PJV), Nick Wambare (Barracuda),
Chris Warrillow (DPE), John Wilkinson (CNPL), Dave Willis (MMPL), Noel Wright (PJV),
Hosea Wura (Telikom).
Disclaimer
Wherever possible, documents and data cited are referenced at the end of this report. Much
information about compensation categories and amounts was obtained from industry and
government sources, and from internal project documents. It was often provided informally,
and source documents are not in the public domain. Information from these sources is not
referenced.
The authors believe that the unreferenced data in this study was provided in good faith and was
correct at the time it was provided. However, responsibility for its inclusion and interpretation
lies with the authors and not the informants.
CHAPTER 1
INTRODUCTION
1.1 Scope of this study
On 3 March 1998, the PNG Chamber of Mines and Petroleum (CMP) invited the authors to
submit a consultancy proposal to prepare ‘Guidelines on Mining and Petroleum Compensation in
Papua New Guinea’. The terms of reference (Appendix 1) were broad, but stressed that the
industry needs contemporary practical guidance on land compensation which make provision for:
• standard compensation payments;
• standard categories of compensation; and
• recommended rates of compensation for these categories.
The terms of reference also asked for a review of, and comment on, community affairs activities
generally at a number of mining and petroleum exploration sites and developments. After
discussion with the Chamber, this aspect was given a lower priority, and eventually became the
subject of a separate study. This enabled the authors to focus more closely on the three primary
objectives of the study which were listed at the outset.
Research leading to this study commenced in October 1998. During the course of the study,
information was received from a number of sources within the mining and petroleum industries.
Both the Department of Mineral Resources (DMR) and the Department of Petroleum and Energy
(DPE) assisted by allowing access to compensation records and other files. Individuals and
companies participating in the study were given an understanding that all published information
would be aggregated wherever possible, and that no published information would be identified
with any particular company or person without prior approval. The first draft of the study was
completed in April 1999, and then circulated to relevant stakeholders for further comment and
discussion. It has since been revised for publication, but does not take account of any events
which have taken place since the first draft was completed.
1.2 Definitions of ‘compensation’ and ‘benefits’
Different people have different views of what compensation is, who should receive it, and how
much it should amount to. The first way to look at compensation is to consider the literal meaning
of the word. The word itself ultimately derives from the Latin pensare, meaning a balancing
weight, and a compensation payment therefore balances a detrimental action, or redresses damage,
deprivation or loss. Thus ‘(t)he purpose of compensation is to put persons who have suffered a
loss back in the original position they would have been in if they had not suffered the loss’
(Whimp 1998a). Compensation is paid by those who cause the loss to those who suffer it, and the
amount of compensation is the replacement value of that loss. This is consistent with Papua New
Guinea’s Mining, Petroleum and Water Resources Acts, which variously define the losses for
which compensation is to be paid, who is liable to pay it, and who is to receive it.
Implicit in this definition is the principle that the amount of compensation should be determined
purely by the value of the thing damaged, rather than the negotiating skills of the landowners, or
the organisation’s ability to pay. Amongst those members of the mining and petroleum industries
who responded to a questionnaire survey conducted as part of this study, 89 percent agreed with
this principle (see Appendix 9, Question 4). Later in the same survey (Question 8), those
surveyed were asked to respond to the statement:
2 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
Projects that are in production and selling their product have a cash income, but
exploration projects or service providers earn nothing. The compensation they pay should
be lower than compensation paid by producers.
Responses were nearly equally divided: 60 percent agreed that explorers should pay less
compensation than developers; 40 percent disagreed. The majority view could be ascribed to the
difference between principle and practice which arises when a company’s ability to pay is taken
into account. Those engaged in exploration might argue that: ‘In principle the tree has the same
value no matter who cuts it down, but producers are paying dividends while we go to the joint
venture with a begging bowl. So we should be able to pay less.’
A second, related but broader, view of compensation argues that some losses are intangible. The
Mining Act recognises this by providing for ‘social disruption’ compensation. It is difficult to
quantify intangible loss or define the affected population. Many mining and petroleum developers
tacitly acknowledge this by providing community benefits in addition to the compensation
required by law. The first three questions in the survey accompanying this study asked about
additional benefits provided at company cost. Responses were received from 102 individuals
representing 26 organisations. The questions and responses are shown in Table 1.1.
Table 1.1: Survey Question 1, 2 and 3 responses.
In addition to statutory compensation as required by law, some organisations provide other
benefits to landowners at their own cost. These may include community benefits such as
education and health programmes, business development support, sponsorships etc.
Yes No
1 Does your organisation provide community benefits at its own cost? 92% 8%
2 In your opinion, are these benefits a form of compensation? 46% 54%
3 Do you think that these kinds of benefits should become part of the
formal compensation system?
34%
66%
Note: Question 1 responses were tabulated to show the percentage of participating organisations providing
community benefits. Questions 2 and 3 aggregate the responses of the individual respondents.
Despite these responses, the authors would suggest that all benefits provided by licensees and
tenement holders at their own expense form a legitimate part of the total compensation
environment. The broad definition of compensation adopted here is therefore ‘community benefit
at company cost’. By this definition, we hope to avoid any nit-picking arguments over the
question of whether certain types of ‘mitigation payment’, such as the Lower Ok Tedi/Fly River
Development Trust (see Section 6.7.1), should or should not be regarded as forms of
‘compensation’. While we primarily focus our attention on statutory compensation, information
on additional company benefits has been incorporated into this study where it is available.
A third argument contends that the State owns the resource, the State licences its extraction and
sale, and the State takes the lion’s share of the profit through taxation, royalties and fees. The
State has a liability to compensate people who suffer in this process, and therefore it provides
benefits to the project area people by allowing them equity in the development, refunding
royalties to them, and providing infrastructure through Tax Credit projects. These benefits are
clearly a form of compensation. Philosophically this may be correct. Benefits provided by the
State have been described and analysed in other studies (Filer 1997c; Taylor and Whimp 1997;
Whimp 1998b), and a new ‘benefit regime’ is prescribed by the Oil and Gas Act 1998 (see
Appendix 4).
This broad definition of ‘compensation’ is one which clearly accords with the perception of many
landowner groups. For example, compensation agreements for the Lihir project are embedded in
a document known as the ‘Integrated Benefits Package’, whose construction reflects the very
broad definition of ‘compensation’ adopted by the Lihir community leaders in their negotiations
with the government and the developer (Filer 1997a). In August 1994, representatives of the Lihir
Introduction 3
Mining Area Landowners Association produced a ‘position paper’ (LMALA 1994) in which they
distinguished four types of benefit: one called ‘compensation’ for ‘destruction’, and the other
three called ‘compensation’ as ‘development’, as ‘security’, and as ‘rehabilitation’. The first and
last of these four types of benefit were clearly seen to match the cost of damage done by mining to
the physical environment, and thus relate to what McGavin (1994) calls ‘the opportunity cost of
lost subsistence production’. But the notion of compensation as ‘development and security’ was
held to embrace a much longer list of desirable objects: the satisfaction of a constantly rising level
of ‘basic needs’; the construction of roads, schools, medical facilities and other items of
‘community infrastructure’; various forms of education and training; the participation of
landowners in ‘business and commercial activities’, including ‘equity participation in the mining
project itself’; and the defence or reconstruction of local custom by means of something known as
the ‘Society Reform Programme’. In a subsequent memorandum addressed to the Law Reform
Commission, the Chairman of the Association defined ‘compensation’ as ‘the state of equilibrium
reached when [the] forces of destruction and impact must [be] equal to the forces of compensation
... [so that] the Landowners are forever happy and accept the losses and impact they will suffer’
(Soipang 1994).
While it is important to acknowledge that landowners are liable to treat ‘benefits’ as a form of
‘compensation’, regardless of the route by which they are delivered to the local community, a
definition of compensation that includes benefits from the State would extend the scope of this
study far beyond its terms of reference.
This is not to deny the existence of a fourth approach to the problem of definition, which consists
of the hard-nosed pragmatic argument that ‘compensation’ is nothing more or less than the cost of
local community support. The bottom line is that both the developer and the State need to profit
from the resource. In order to make profits, the developer must be able to operate. The State is
unwilling or unable to ensure continuity of operation by rule of law; therefore, the people who
could halt these operations must be kept acquiescent in some other way. It follows that the proper
compensation recipients are those who could stop operations, and the proper amount of
compensation is the lowest amount which they will accept as the ‘price’ of not doing this. The
hypothesis has a certain blunt appeal, but adopting it is unlikely to lead to positive
recommendations and proposals of practical value to the mining and petroleum industries.
This being said, it would be naive not to recognise the existence of a dichotomy between
pragmatism and principle. Most parties would espouse the principle that, for compensation
purposes, a spade is a spade and a tree is a tree, and the only question is one of how to calculate
the tree’s intrinsic, utilitarian or commercial value. In practice, most parties, by word or action,
acknowledge that the pragmatic compensation value of the tree is that amount which will allow
the project to proceed, and that this value may be neither intrinsic, utilitarian nor commercial.
1.3 Previous initiatives to deal with compensation issues
In this section we shall briefly review the previous initiatives which have been taken over the
course of the past decade, either by government agencies or peak private sector bodies, to deal
with the ‘compensation problem’.
1.3.1 Policy reform under the Namaliu government, 1988-92
A variety of initiatives were taken to reform PNG’s mineral development policy in the early years
of the Namaliu government. These were initially prompted by the experience of negotiating the
development of the Misima and Porgera projects, but were then given an added sense of urgency
by the outbreak of the Bougainville rebellion at the end of 1988. The National Executive Council
(NEC) had approved drafting instructions for a new Mining Act in November 1981, but no further
action was taken until 1987, when the Department of Minerals and Energy (DME) engaged a
consultant to revive the process (see Dalton 1988; Hunt 1989). A discussion paper was circulated
to other government departments in January 1988, and a new set of drafting instructions was
circulated in May that year. But the final shape of the new legislation was not hammered out until
1992, by which time a variety of stakeholders had been given the opportunity to debate its
4 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
contents at considerable length. Here we shall only consider the arguments advanced on the topic
of ‘compensation’ within this larger debate.
In 1988, a discussion paper entitled ‘Mining Compensation in Papua New Guinea’ was prepared
for the PNG Chamber of Mines and Petroleum (Henton 1988). The paper drew heavily on the
Misima and Porgera compensation agreements, which in turn were influenced by the first Ok Tedi
agreement (1976) and (at a greater remove) the 1980 Bougainville agreement. In summary, the
paper:
• proposed that the Misima and Porgera agreements be used as a model for landowner
comensation in the mining sector, during exploration as well as development, to ensure
consistency and ease the transition from exploration to development;
• proposed standard rates payable for four standard categories of deprivation and damage;
• recommended that every effort be made to adhere to the Valuer-General’s guideline prices;
• recommended that any water-related compensation be agreed with the (then) Bureau of Water
Resources, and that the practice of paying for ‘water rights’ for use of water be discontinued;
• made recommendations about occupation fees payable under the Mining Act of the day, and
• recommended that companies make a clear separation between compensation and any other
additional benefits provided by them to the community.
The 1988 paper has provided valuable guidelines to the mining sector for ten years. However, as
the industry has evolved and matured, issues which the paper treated in passing have become
more significant, new issues have emerged, and others have faded.
In June 1988, the National Premiers Council established a Mining and Petroleum Working
Committee, with terms of reference which were designed to provide the provincial governments
with a collective voice in the process of revising the Mining Act. The premiers of Enga and
Southern Highlands provinces were the main instigators of this move. The Committee held three
meetings in Port Moresby, and presented its final report in September 1988. Amongst the twelve
issues on which the Committee was asked to make recommendations were:
• compensation to landowners for environmental and social disturbance; and
• the payment of rent to landowners for the use of their land.
On these points, the Committee supported the DME’s proposal to specify a new set of
compensation categories in the Mining Act, but objected to the idea that landowners should be
subject to criminal sanctions for requesting forms of compensation other than those specified in
the Act, and suggested that the amount of occupation fees should be determined by a process of
negotiation, rather than being prescribed in the Act itself. The Committee also proposed that the
Petroleum Act should be amended to allow for the same range of compensation payments
(including occupation fees) as those to be recognised in the new Mining Act (NPC 1988: 22).
The DME, in its Cabinet submission of November 1988, argued against the negotiation of
occupation fees between licence-holders and landowners, on the rather peculiar grounds that
‘many landowners are unaware of the commercial value of their crops and trees and could be
taken advantage of by outside agents’. It was suggested instead that occupation fees should be set
by regulation, and that the Valuer-General should be instructed to ‘re-evaluate the fees established
in the Valuation Act to more realistic levels’ (NEC 1988: 9). The same submission proposed the
institution of the ‘Development Forum’ as a mechanism for consultation between the national
government, the provincial government, and local landowners over the distribution of benefits
arising from new mining and petroleum projects, in specific recognition of the strong stand being
taken by the Enga Provincial Government over the benefits to be derived from the Porgera gold
mine. However, the forum process, as finally prescribed in Section 3 of the new Mining Act, does
not officially have anything to do with the payment of compensation or provision of other direct
Introduction 5
benefits by developers to local landowners, because the developers are not legally party to the
process.
In April 1989, the NEC appointed a Special Committee, chaired by John Kaputin, to ‘investigate,
identify and analyse the nature and origins’ of the crisis in the North Solomons Province. The
Committee’s terms of reference included a request for the committee to devise strategies for
renegotiating the Bougainville Copper Agreement and reassuring foreign investors, while taking
account of the ‘needs and aspirations of the traditional landowners directly affected by the mine
and associated developments’ (Kaputin 1992: xvii). Kaputin (ibid: 114-5) recommended:
• the appointment of an ‘environmental advocate or watchdog’ for provinces containing large-
scale natural resource projects, whose functions would be to ‘carry out or commission
investigations in response to requests from the public; publish the findings of such
investigations; and recommend and/or launch prosecutions’; and
• ‘the establishment of a tribunal, the equivalent of a court – though not necessarily with lawyers
or lawyers alone as members – to hear cases concerning the application of legally enforceable
environmental standards’.
Wolfers (1992) has provided further discussion of the thinking behind these recommendations.
No serious effort has since been made to implement them, partly because the resolution of the
Bougainville crisis was no longer seen to be closely linked to the mainstream mineral policy
process.
In November 1989, the Minister for Justice, Bernard Narokobi, asked the Law Reform
Commission (LRC) to undertake a wholesale review of legislation relating to the conservation and
development of natural resources. This was motivated by the ‘troubles’ at Mount Kare (Filer
1997a), and by Peter Donigi’s argument to the Supreme Court that State ownership of mineral
resources violated the National Constitution (see Donigi 1994). In respect of the laws relating to
non-renewable resources, the purpose of the review was to recommend changes which would
‘conserve the resource and minimise the effects of extraction on the physical, biological, social
and cultural characteristics of the affected environment’. The LRC organised a workshop to
discuss these issues (LRC 1990), but no legislative changes emerged from this discussion.
During this period, the Institute of National Affairs (INA) was also commissioning its own studies
of the ‘compensation problem’ in PNG. In 1989, the INA engaged Jack Knetsch, a ‘behavioural
economist’, to produce a brief study of the way that people generally value gains relative to
losses. Knetsch (1989) argued that people generally value their material losses more highly than
they value any compensating gains which have the same market price, and Melanesian
landowners, like other human beings, should therefore prefer the mitigation of environmental
damage to a compensation payment which reflects the value of their lost resources. In 1991, the
INA funded another economist, Paul McGavin, to examine some of the problems associated with
managing the stability of mineral resource development contracts in PNG. McGavin’s view of
compensation demands by customary landowners was that they represented a mixture of ‘genuine’
claims for damage with a form of rent-seeking behaviour:
Compensation claims in Papua New Guinea usually start off with some fabulous sum that
first ‘comes into the head’ and, in customary circumstances, conclude with the maximum
that can be extracted. In principle, there are valid claims that fall within an opportunity
cost understanding of contributions that may be brought by customary landowners to the
contractual setting.…. In practice, however, the greater part of compensation claims
brought by customary landowners are likely to involve a search for unearned incomes
(McGavin 1994: 12).
At the same time, he argued that the ‘unrealistic opening claims’ of landowners, while partly
reflecting the ‘customary’ Melanesian principle of pitching one’s compensation demands at the
other party’s perceived capacity to pay, also reflected their failure to recognise the size of the
surplus available for distribution, confusion between gross and net incomes, defective
understanding of value creation, or recognition of the possibilities for sabotage and banditry (ibid:
72). In order to overcome these deficiencies in people’s understanding of compensation, he
6 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
recommended the establishment of ‘Local Area Development Trusts’ to ensure that the surplus
incomes of landowners ‘are effectively and efficiently applied to capital reconstruction and
expansion ... so that the aim of improved economic security is achieved’ (ibid: xviii).
In July 1991, Parliament approved an amendment to s.3(90) of the Criminal Code which
prescribed a term of imprisonment of not less than seven years for people found guilty of making
extortionate compensation demands (see Section 2.5). The motivation for this measure was a
series of demands which had recently been made in respect of various public utilities, especially
mountain-top repeater stations. The amendment was gazetted in November 1991, but no police
prosecutions ensued.
1.3.2 Policy reform under the Chan-Haiveta government, 1994-97
Bernard Narokobi’s terms of reference for the LRC were reactivated in 1994, resulting in a
collection of academic papers on ‘compensation for resource development’ (Toft ed. 1997) and a
working paper containing the results of a survey of public opinion on ‘land compensation and
development’ (Toft and Saffu 1997). These studies received the support of the CMP, but no
changes to government policy or legislation have been formulated as a result of them. However,
the LRC contract officer responsible for this work was an active participant in the bureaucratic
exercise described in the next paragraph.
In February 1995, the Prime Minister, Sir Julius Chan, established an inter-departmental working
committee, under the chairmanship of his own department, with a brief to recommend guidelines
or procedures for controlling ‘excessive compensation claims’. This initiative was provoked by a
particular claim which had been made in respect of the Wewak airport in East Sepik Province.
This committee included representatives from the Department of Mining and Petroleum and the
CMP, as well as from the LRC, and held a number of meetings during the course of 1995. As a
result of these meetings, the committee recommended:
• the establishment of a Land Development Commission, incorporating the present functions of
the National Lands Commission, the Land Titles Commission, the Land Court Secretariat, the
Land Investigation Branch of the Department of Provincial and Local Government Affairs, and
(perhaps) also the Office of the Valuer-General, which would be responsible for the
identification of customary landowners and the settlement of all disputes and compensation
claims relating to customary land;
• a review of all existing legislation relating to land disputes and compensation, with a view to
standardising procedures and drafting a new Compensation Act, for which the Land
Development Commission would take administrative responsibility;
• the establishment of a Landowners Compensation National Trust, into which landowners
would be encouraged or obliged to deposit a certain percentage of compensation payments
made in respect of their land, in order to make provision for future generations of landowners;
and
• the adoption of a standard method of distributing cash compensation payments to individuals
or nuclear families, rather than to larger groups, in order to minimise the risk of
misappropriation by the leaders or representatives of those groups (Toft 1995).
In the form in which they were presented, these proposals seem to have fallen on deaf ears. In
regard to landowner compensation in the mining and petroleum sectors, it seems unlikely that a
government would have the political will to pass the required legislation, or the bureaucratic
ability to implement it. Nevertheless, several of the committee’s concepts and proposals have
become part of the recent debate on the distribution of ‘project benefits’ in the petroleum sector
(see below).
Introduction 7
1.3.3 Policy reform under the Skate government, 1997-98
In the ten years which have elapsed since the CMP last commissioned a study of the compensation
question, a number of changes have taken place in the mining and petroleum sectors. The Mining
Act has been repealed and replaced, and occupation fees no longer apply. New mines have been
developed and prospects explored, petroleum exploration has surged, and two Petroleum
Development Licences have been granted. Landowner benefits through royalties and equity
participation have increased dramatically, and the Tax Credit Scheme has been implemented. Ok
Tedi Mining Ltd (OTML) is now working under its Eighth Supplemental Agreement, and at Lihir
a comprehensive Integrated Benefits Package has been negotiated. Both Misima and Porgera have
found that the compensation which they pay for damage to vegetation and improvements is far
greater than the annual amounts payable under their initial agreements, and all developers provide
substantial benefits and social services to their project area communities in addition to statutory
compensation.
Towards the end of 1997, a consultancy report (Taylor and Whimp 1997) on various aspects of
petroleum sector policy was prepared for the DPE under a Technical Assistance Grant from the
Asian Development Bank. This report included a discussion of the compensation provisions of
the Petroleum Act, but made no specific recommendations for their amendment. It was rather
more concerned with questions of landowner organisation and the distribution of ‘landowner
benefits’ as a share of the resource rent collected by the State. Following discussion of this report
at a seminar held in February 1998, an ‘action team’ was established to draft proposals for
amendments to existing legislation which would clarify these latter questions. As result, a set of
drafting instructions for a possible Petroleum (Project Benefits) Act were produced in July 1998,
with an understanding that the questions of ‘landowner compensation’ in the petroleum sector
would need to be addressed at a later date and by other means. In the event, it was decided that
the existing Petroleum Act should be replaced by a single Oil and Gas Act, which would include
amended provisions for the distribution of ‘landowner benefits’ and for the payment of
compensation. The new act was passed by Parliament in the budget session of November 1998.
The amendments thus made to the compensation provisions of the Petroleum Act are discussed in
Section 2.1 below.
CHAPTER 2
PNG GOVERNMENT LEGISLATION ON COMPENSATION
2.1 Mining and petroleum compensation agreements
There are important differences between the compensation legislation governing the mining and
petroleum sectors. With the exception of the Ok Tedi project, and formerly also the Panguna
project (see Chapter 6), mining exploration and development are now governed by the Mining Act
1992, which replaced the Mining Act (Amalgamated) 1977 (Chapter 195). The Petroleum Act
(Chapter 198) governed petroleum1 exploration, development and pipelines until 1998, when it
was replaced by the Oil and Gas Act, which also applies to processing facilities.
The first significant difference between the sectors (for compensation purposes) is that licensees
under the Mining Act must have a registered compensation agreement prior to entering or
occupying land for the purposes of mining, as specified in s.155(a) of the Mining Act. Strictly
speaking, an agreement is not required if ‘compensation has been determined in accordance with
this Part, and the holder of the tenement has paid or tendered such compensation as is then due’
(s.155(b)), but every development to date has involved the negotiation of a formal agreement.
The agreement is submitted to the Chief Warden, who may either recommend that it be registered,
or request amendments to the agreement. The parties to the agreement are not obliged to accept
the requested amendments. There are no equivalent provisions in the Petroleum Act or in the new
Oil and Gas Act, and petroleum development can take place without an overarching compensation
agreement with all potential compensation recipients.
Secondly, definition of the persons eligible to receive compensation varies between the Mining
and the Petroleum Acts. Section 155 of the Mining Act states that a holder of a tenement (or
licensee) is liable to pay compensation to the ‘landholders’ for all loss or damage suffered by
them. A landholder is defined by the Act (s.2(1)) as a person who is recognised as an owner of
customary land, or who is the owner or lawful occupier of land other than customary land. Prior
to commencement of mining, licensees therefore make a blanket agreement with the landholders.
Petroleum licensees (exploration and development) and pipeline licensees are required to pay
compensation to the ‘owners and occupiers of, and any persons interested in’ any private land in
respect of their entry onto or occupation of that private land (s.81 of the Petroleum Act; s.118 of
the Oil and Gas Act). Private land is any land that is not government land (s.2(1) of the Petroleum
Act). They may make an agreement with a person entitled to compensation, and this agreement
shall not be valid unless it is in writing, signed by the parties to it or their agents, and lodged with
the Director (s.81(5) of the Petroleum Act; s.118(5) of the Oil and Gas Act). Unlike the Mining
Act, there is no provision for the Director to formally register such agreements, or to request
amendments to them by the parties.
Given the complex and dynamic nature of land tenure in Papua New Guinea, the practical
difficulties of identifying all ‘occupiers of, and persons interested in’, the land in a licence area
effectively precludes a petroleum licensee from making an over-arching agreement with them. It
is doubtful whether such an agreement would bind a person who could demonstrate an interest in
the land (however slight), but who was not a party to the blanket agreement, either individually or
1 The interpretation of the word ‘petroleum’ in this study includes all naturally occurring hydrocarbons and mixtures
containing one or more hydrocarbons, whether in a gaseous, liquid or solid state.
PNG Government Legislation on Compensation 9
through a legitimately appointed agent. It therefore seems unlikely that a petroleum licensee
could make the same sort of blanket agreement that is required of miners.
These differences between the laws which apply to the two sectors result in two quite different
kinds of compensation agreement. The major difference can be summarised as follows:
• A mining compensation agreement is a blanket agreement, made with all landholders within
the tenement prior to mining. The mining developer has a single over-arching compensation
agreement.
• Petroleum compensation agreements are individual agreements, made with each person or
group entitled to compensation in respect of each entry onto, or occupation of, land belonging
to that person or group. Each agreement is a ‘one-off’ deal, and over the course of time, the
licensee can and probably will make a large number of agreements with different people or
groups. There is no requirement for a single over-arching blanket agreement.
In 1990, Chevron Niugini Pty Ltd (CNPL) did in fact make a blanket agreement with ‘the
Landowners’ of the area of PDL 2. It was signed by a number of people, including provincial and
national politicians, senior bureaucrats and community leaders. Section 81(5) of the Petroleum
Act stated that an agreement ‘shall not be valid unless it is in writing and signed by the parties to
it, or their agents...’ The vast majority of the landowners who purported to be parties to the
agreement had no knowledge of its contents, did not sign it themselves, and did not appoint agents
to sign on their behalf. Although well-intentioned, this agreement could not meet the
requirements of s.81 of the Petroleum Act. Any owner, occupier or person interested in the land
within the PDL (except the actual signatories) could have repudiated the agreement, and then
demanded that CNPL make a specific agreement as required by the Petroleum Act. As a result,
CNPL also devised a standard ‘Compensation Claim and Receipt’ form that is used for every
payment. The form is in fact a stand-alone pro forma agreement, meeting all the requirements of
the Act. These individual documents are the agreements allowed for by s.81(4) of the Petroleum
Act, and each individual agreement is made valid by lodging it with the Director under s.81(5).
The compensation provisions of the new Oil and Gas Act diverge from those of the former
Petroleum Act in four main ways:
• The new act (s.116) grants additional powers to the Minister to grant licensees the right to
enter land which is not part of their tenements, for purposes such as ‘business development
activities’ or the ‘provision of community services’, and grants additional rights to licensees
to do so without ministerial approval in the event of an emergency.
• The new act (s.118) deletes the references made to the role of the Warden’s Court in s.81 of
the Petroleum Act, and replaces these with provisions for the role of the Warden or Chief
Warden which are derived from s.157 of the Mining Act.
• The new act (s.118(6)) also follows the Mining Act (s.154(3)) in subjecting rates of
compensation for ‘economic trees’ to the schedule published by the Valuer-General, where no
such provision had previously been made in the Petroleum Act.
• The new act goes further than the Mining Act, as well as the old Petroleum Act, in providing
for the settlement of land and compensation disputes by reference to the Land Disputes
Settlement Act (Chapter 45).
The relevant provisions of all three acts are attached as Appendices 2-4 of the present study.
2.2 Compensation under the Land Act
The compensation provisions of the Land Act (No. 45 of 1996) apply only to land or chattels
which are acquired by the State (s.14). Implementation of these provisions should be the
responsibility of the State, but operators (or explorers) for whom land is acquired by the State
need to make themselves familiar with Part IV of the Land Act, which deals with compensation.
10 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
The following points are worthy of note:
• The State or any interested person may apply to the National Court to make orders declaring or
adjusting rights and liabilities in connection with land acquired by compulsory process. These
orders may include orders for payment or repayment of money (s.20).
• A person whose land has been acquired by the State may make a claim for compensation to the
Department Head (s.21(1)).
• Compensation is not payable if the claim is not made within one year of the acquisition, unless
otherwise allowed by the Department Head, or if the claimant’s interest is inconsistent with an
interest claimed by another person to whom the State, in good faith, has paid or agreed to pay
compensation.
• If a claim is rejected, the claimant may bring an action against the State in the National Court
(s.22).
• Compensation for land acquired by compulsory process is determined with regard to the value
of the land, any damage caused by severing the land from other land belonging to the claimant,
and any enhancement or depreciation of the value of any adjoining land belonging to the
claimant. The value is not affected by the proposed use of the land thus acquired (s.23).
• The Minister and the claimant may agree to have compensation for land acquired by
compulsory process determined under the Arbitration Act (s.27). If they agree to go to
arbitration, and a third party subsequently makes a counter claim, the Minister can revoke the
agreement to go to arbitration.
2.3 Agreements under the Water Resources Act
The Water Resources Act (Chapter 205) also imposes a liability to pay compensation on holders
of permits under that Act. Any use or discharge of water requires a permit, and thus, in practice,
all mining and petroleum development (and much exploration) requires a permit under the Water
Resources Act. Following the wording of the Petroleum Act (and now the Oil and Gas Act),
compensation is payable to the ‘owners, occupiers of, and any person interested in’ any private
land, and like the relevant provisions of the Petroleum Act, an agreement shall be signed by the
parties to it and lodged with the Director (of Water Resources).
The compensation requirements of the Water Resources Act partially replicate those of both the
Mining and the Petroleum Acts. Duplication can be avoided if agreements under either of these
Acts are worded in such a way that they also meet the provisions of the Water Resources Act.
These agreements can then also be lodged with the Director of Water Resources. Sections 4(1)
and 4(2) of the Water Resources Act state that ‘the right to the use, flow and control of water is
vested in the State ... [without affecting] customary rights to the use of water by the citizen
residents’. Landowners may therefore only be compensated for the ‘loss of beneficial use’ of
water.
A Draft Environment Bill was prepared in June 1998, which (if enacted) will replace several
existing Acts, including the Water Resources Act. The compensation provisions of this draft bill
differ in several significant respects. These differences would call for further rewording of
mining and petroleum compensation agreements to ensure that they also comply with the
Environment Act.
PNG Government Legislation on Compensation 11
Table 2.1: Compensation provisions of the Water Resources Act and the Draft Environment Bill.
Water Resources Act Draft Environmental Bill (draft of 26/6/98
incorporating suggested changes 18/8/98)
S.16(1) Compensation is payable to ‘the owners
and occupiers of, and any person interested in’
any private land.
S.90(1) Compensation is payable to ‘the owners
and occupiers of, and any person with customary
rights in’ any private land.
S.16(4) ‘A holder may agree with any person
entitled to compensation under this section...’ S.90(4) ‘subject to Subsection (5), a permit holder
may agree with any person entitled to compensation
under this section...’
S.90(5) ‘Prior to an agreement under Subsection
(4), either party may by written notice apply to the
Director to confirm the basis for compensation.’
S.90.(7) ‘Where either party is dissatisfied with the
Director’s decision on the basis of compensation,
they may apply for a review of the decision under
Section 69.’ (Note: There are some discrepancies in
the numbering of sections between the various
drafts. This review is presumably a review by the
courts.)
S.16(6) ‘Where the parties are unable to agree
on the amount of compensation to be paid, either
party may, by written notice, apply to the
Minister to have determined the amount of the
payment and the time at which it shall be paid.’
S.90(8) ‘Where the parties are unable to agree on
the amount and form of compensation to be paid,
either party may by written notice apply to the
Minister who shall, on the advice of the Council
determine the amount and form of the payment and
the time in which it shall be paid.’ Note: the
Council referred to is one established by the draft
Bill. Its first object is to carry into effect the
objects of the Act.
S.16(7 to 14) prescribe determinations which the
Minister may make. S.90(9 to 11) require that Minister shall make these
determination on the advice of the council.
2.4 Rivers, waterways, and the seabed
During exploration, companies are not likely to be laying pipelines on sea or river beds, but
programmes or projects may be supplied by boat. Compensation may be claimed for vessels
navigating waterways or rivers, or for a barge moored in an inlet, a bay, or mid-stream. If the
vessel or barge is tied up to a bank, or beached, there may be argument for compensation for use
of the land affected. The discussion here relates primarily to the implications of navigation or
mooring rather than a shore base. Some relevant legislation is summarised in Appendix 6. The
authors are not qualified to give a legal opinion as to its completeness, applicability or
interpretation.
Where a vessel is moored against a bank, within or in the vicinity of a licence area or tenement,
the landowner could make a claim based on occupation or use of his land under the Petroleum or
Mining Acts. The Water Resources Act allows the owner of land abutting a river or lake right of
access to that part of the bank or bed adjoining his land. Restricting his access to it could lead to a
compensation claim under this Act.
Where there is damage to banks or improvements (including canoes) caused by the wake of
passing vessels, there may be an entitlement to compensation under the Mining Act, the Oil and
Gas Act, or possibly the Water Resources Act. The Oil and Gas Act, like the Petroleum Act
before it, also imposes a compensation liability for damage to animals or fish. It could be argued
that frequent use of a waterway by powered vessels has caused fish to move away, resulting in a
compensation claim. Landowners could also claim that the waterway is a customary right of way,
12 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
and any restriction of access to it caused by the activity of the company makes the latter liable to
pay compensation. In the above cases, the land or waterway would need to be within, adjoining,
or in the vicinity of, a tenement or licence area. Where a petroleum licensee has interfered with
fishing or navigation, and has not given prior notification to the Director, he is committing an
offence and is liable to a fine of K5,000.
From time to time, landowners have demanded compensation for vessels passing along their
waterways or past their villages. This is more in the nature of a toll than compensation for any
specific loss, damage or deprivation. The Customs Recognition Act (Chapter 19) allows custom
to be taken into account in civil cases, providing that this does not result in an injustice or is not in
the public interest. If a landowner made a civil claim for the toll, and argued that payment of a
toll was customary, the court would have to decide if the custom did in fact exist, and if its
recognition was in the public interest. Depending on the proclivities of the crew, villagers living
along waterways could also claim that ships in the night caused ‘social disturbance’, for which
there is a compensation liability under the Mining Act.
Sometimes, it is convenient to moor a dumb barge in a waterway, as a staging point or supply
base. People with customary rights over the water or adjoining land could claim that such an
object restricts access, frightens fish, causes social disruption or interferes with fishing or
navigation. It should also be noted that the Land Titles Commission Act allows a Local Court
with jurisdiction over a particular area to adjudicate disputes over customary rights and issue
restraining orders. Thus, a landowning group which has been dealing with a company could have
its customary right to do this challenged by another party, leaving the company up the creek
without a patron. Spillage or discharge from the barge could constitute an offence under the
Environmental Contaminants Act. Conviction could be followed by a civil claim for
compensation. The Environmental Contaminants Act also deals with noise. The sound of an
unsilenced or noisy generator on a barge or other vessel moored near a village could constitute
noise pollution, which is an offence under the Act. There is no provision for paying compensation
to the community which is affected, but there is also no law which prohibits such action. Payment
of compensation would not indemnify the company against action under the Act, but may mitigate
the possibility of action and the offence itself. It would seem more reasonable to fit a silencer to
the generator.
The multiplicity of legislation that may lead to legal action or supportable compensation claims
for the various uses of waterways makes it impossible to lay down firm guidelines. In reality,
common sense should prevail, albeit mediated by an awareness of the various legislative
provisions.
The Kutubu Export Pipeline runs down part of the Kikori River, through the Kikori Delta, and
across the seabed to the Kumul platform in the Gulf of Papua. CNPL, as the pipeline licensee,
believes that the rights to the submarine surface are vested in the State. The licensee’s
compensation liability is limited to private land, and thus no compensation is paid. However, the
State has allowed river-bank and delta landowners a portion of the equity which it has distributed
to project area landowners, thereby recognising them as having some undefined submarine rights.
The basis for this recognition has never been explained, and it is unclear whether the equity
relates solely to the river-bed, or includes some recognition of rights over the seabed. In the delta
there is no clear cut-off point between the Kikori River and the Gulf of Papua. In either case,
recognising submarine rights sets a precedent for future submarine pipelines, and particularly for
the proposed gas pipeline to Queensland. This is particularly so if the State has recognised rights
over the Gulf seabed.
The proposed gas pipeline traverses Torres Strait, over parts of which there are complex
international agreements between Australia and Papua New Guinea. These agreements recognise
the customary access and fishing rights of some Papua New Guineans in Australian waters. If the
State has already recognised customary submarine rights by distributing equity in respect of the
Kutubu Export Pipeline, does this recognition extend to similar customary rights, recognised by
treaty, in the Australian waters of Torres Strait?
PNG Government Legislation on Compensation 13
The argument is as muddy as the waters of the delta, and complex beyond the competence of the
authors to make any clear judgment. It forms part of the broader debate over the distribution of
benefits by the State. Unless there are unforseen implications for licensee compensation liability,
the issues fall outside the scope of this study.
2.5 The Criminal Code
On 14 November 1991, an amendment to the Criminal Code was gazetted and came into force.
The amended section reads:
S.3(90)(A).
A person who, with intent to extort or gain anything in payment or compensation from any
person −
(a) demands the thing, payment or compensation and
(b) in order to obtain compliance with the demand
(i) causes or threatens to cause injury to any person or damages any property; or
(ii) does or threatens to do any act which renders or is likely to render any public
road, bridge, navigable river, or navigable channel, natural or artificial,
impassable or less safe for travelling or conveying property; or
(iii) otherwise unlawfully threatens or intimidates any persons
is guilty of a crime.
Penalty: imprisonment for a term not exceeding seven years.
The Post-Courier (5 December 1991) reported that ‘Police Minister Mathias Ijape and a
spokesman for Police Commissioner Ila Geno expressed surprise that the law had become
effective’. None of the government officers interviewed for this study are aware of any instance
of charges being laid under this section.
2.6 The liability to compensation
The compensation liability of licensees and permit holders under the three principal Acts is
summarised and compared in Table 2.2. The three Acts contain broadly similar, and sometimes
identical, provisions. Differences occur in the explicitness of otherwise parallel provisions, and in
the Water Resources Act’s focus on water-related damage and deprivation.
2.7 Determination of compensation and dispute resolution
The Mining Act alone gives direction as to how compensation shall be determined. Section
154(3) states that: ‘Where applicable, compensation shall be determined with reference to the
values for economic trees published by the Valuer-General.’ These values are discussed in
Chapter 3 below. The Petroleum and Water Resources Acts merely state that a licensee, pipeline
licensee or permit holder ‘may agree with any person entitled to compensation’. As noted above
(Section 2.1), the new Oil and Gas Act makes explicit reference to the Valuer-General’s schedule
of values.
All three Acts prescribe the procedures to be followed if the parties are unable to agree on the
amount of compensation to be paid. In case of dispute, the Water Resources Act allows either
party to apply to the Minister to have the amount of compensation determined, but the legislation
applied to mining and petroleum projects requires determination by a Warden. In the case of the
Petroleum Act, this has caused major problems and uncertainties, and the new Oil and Gas Act
does not seem to remove them.
14 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
Table 2.2: Compensation liability under existing legislation.
Mining Act (s.154) Oil and Gas Act (s.118) Water Resources Act (s.16)
(2) Subject to subsection (4),
the compensation to which
landholders are entitled
includes compensation for -
(2) Subject to this section,
compensation shall be paid for - (2) Subject to this section,
compensation shall be paid for -
(a) being deprived of the
possession or use of the
natural surface of the land;
and
(a) the deprivation of the use and
enjoyment of the surface of the
land or any part of it, or of any
rights customarily associated with
it, except where there has been a
reservation in favour of the State
of the right to such use and
enjoyment; and
(a) the deprivation of the use and
enjoyment of the surface of the
land or any part of it, or of rights
to water customarily associated
with the land, except where there
has been a reservation in favour
of the State of the right to that
use and enjoyment; and
(b) damage to the natural
surface of the land; and (b) damage -
(i) to the surface of the land or
any part of it, or any
improvements on it; or
(ii) to any trees, fish or animals,
caused by the carrying on of
operations by the licensee or
pipeline licensee; and
(b) damage to the surface of the
land or any part of it or
improvements on it, or to any
flora or fauna, caused by the
carrying on of operations under a
permit; and
(c) severance of land or any
part thereof from other land
held by the landholder; and
(c) severance of the land from
other land of any owner, occupier
or person interested in the land;
and
(d) any loss or restriction of
right of way, easement or
other right; and
(d) rights of way and easements;
and (c) rights of way and easements;
and
(e) the loss of, or damage to,
improvements; and
(f) in the case of land under
cultivation, loss of earnings;
and
(g) disruption of agricultural
activities on the land; and
(h) social disruption.
(e) any other damage
consequential on the licensee’s or
pipeline licensee’s use or
occupation of the land.
(d) any damage consequential on
the holder’s use or occupation of
the land, or use or control of
water or a water source on or in
the land.
Note: A draft Environment Bill has been prepared which (if enacted) will replace the Water Resources Act.
Differences in the compensation provisions of this Bill and the Water Resources Act are noted in Table 2.1
above.
The Mining Act (Chapter 195) established a system of Mining Wardens, defined their authority,
and empowered them to convene and hear Wardens’ Courts. This Act was repealed with the
passing of the Mining Act 1992, and the new Act modified the powers of Wardens. Wardens’
Courts no longer exist, and Wardens now make determinations rather than convening courts.
When the Petroleum Act was enacted, the Mining Act (Chapter 195) was still in force, and the
Petroleum Act made reference to this now repealed Act. The Petroleum Act interpreted a
‘Warden’ to mean a Warden within the meaning of the Mining Act. Similarly, a ‘Wardens’
Court’ under the Petroleum Act meant a Wardens’ Court within the meaning of the Mining Act.
Thus the Wardens and Wardens’ Courts of the Petroleum Act derived their authority from an Act
that had been repealed. This anomaly has been removed with the passage of the new Oil and Gas
Act.
PNG Government Legislation on Compensation 15
Two other compensation provisions are worthy of note. Firstly, both the Mining and Petroleum
Acts (and now the Oil and Gas Act) prohibit making any allowance for the value of petroleum or
minerals known or supposed to be in, on, or under the land. Ownership of these is vested in the
State. The Mining Act (but not the Petroleum Act or the Oil and Gas Act) also states that no
compensation shall be payable and no claim for compensation shall be admissible in respect of
permitting entry onto the land for exploration or mining purposes. The Misima (1987), Porgera
(1988) and Ok Tedi (1997) agreements include payment of the occupation fee required under the
old Mining Act. This appears to be inconsistent with the Mining Act of 1992.
Secondly, the Water Resources, Mining, Petroleum, and Oil and Gas Acts all require that
compensation be paid for damage or injury to any improvements on land adjoining, or in the
vicinity of, land occupied under a licence or permit (Sections 16(3), 154(6), 81(3) and 118(3)
respectively).
CHAPTER 3
THE VALUER-GENERAL’S GUIDELINES
3.1 Background and scope
The Office of the Valuer-General is part of the Department of Lands and Physical Planning.
Since 1985, the Valuer-General has periodically published a schedule of values for small,
medium and mature economic trees and plants. The preamble to the schedule dated 1 January
1998 explains these definitions of tree size, and states that ‘(t)hese guidelines are for general
use as local conditions, scarcity/abundance will affect the value of a particular item’. Recently,
the schedule has been expanded to include ceremonial grounds, grave sites and ‘sacred sites’.
The Valuer-General’s guidelines are commonly used in the mining and petroleum sectors to
establish compensation rates for trees and plants, and as the basis of schedules of values
incorporated into mining compensation agreements. Appendix 7 summarises the rates derived
from various project agreements and periodic guidelines issued by the Valuer-General.
The Valuer-General was interviewed in August 1998. He advised that periodic revisions to the
schedule are triggered by information received from government field staff, but that he seldom
receives reports of negotiated values from mining or petroleum sector field staff. He stressed
that the suggested values are guidelines only, and that prices negotiated should be expected to
vary with local conditions. He also agreed with the common field practice of applying the
guideline values to sample tree and plant counts of representative areas of land in order to
calculate a mean standard vegetation value per hectare.
Each successive schedule has specifically referred to ‘economic’ trees and plants, and this has
sometimes caused confusion. The word ‘economic’ suggests a qualification or restriction. The
inference could be made that some trees and plants are not economic – perhaps those that are
self-seeded, or are not actively harvested – and are therefore excluded from the schedule. The
Valuer-General commented that use of the word ‘economic’ is an unintentional carry-over from
the first schedules published, which dealt primarily with subsistence and cash crops (see Soloi
1994). The scope of his schedule has now expanded, but there is no intent to restrict the
meaning of the items listed.
The most recent (1998) schedule includes definitions of ‘small’, ‘medium’ and ‘large’ trees or
plants, and divides the plants and other items listed into four categories: ‘perennial’ (Category
A), ‘edible’ (Category B), an unnamed Category C, and ‘plants that grow in clumps’ (Category
D). Category C includes:
• ‘ceremonial grounds’ (1-5 hectares) at K1,200 per hectare;
• ‘ceremonial grounds’ (over 5 hectares) at K800 per hectare;
• ‘grave sites’ at K1,000 per site; and
• ‘sacred sites’ at K600 per site;
as well as canoe trees, kunai grass, wild sago and casuarina. No distinction is made between
‘small’, ‘medium’ and ‘mature’ plants in Category D, presumably because they grow in clumps
containing a mixture of plants of different sizes (though it is difficult to see how this would
apply to sago palms).
Several issues were raised by industry representatives during the study. Questions were asked
about the definition of ‘hardwood or millable timber’. Many people felt that the value of a tree
The Valuer-General’s Guidelines 17
as timber is particularly sensitive to location – a millable tree that can be taken to a sawmill is
of considerably greater value than one which is inaccessible. Most other trees listed are valued
for what they produce – fruit or nuts for instance. This produce can be consumed on the spot,
or carried away easily for later sale or consumption, and thus the bearing trees have a lesser
sensitivity to location. In the same way, ‘canoe trees’ in an area where people do not make
canoes, or which are located far from navigable waters, will never be turned into canoes. Can
they then be canoe trees? It was suggested that the Valuer-General could list two sets of
guideline values for trees valued for their timber – with higher values for trees accessible to a
sawmill or other end-use location, and lower values for trees in remote areas.
There appears to be a discrepancy in the values given to sago. ‘Wild Sago (or that which
covers a large area)’ is valued at K30 per hectare in Category C, while in Category D, ‘Sago
(edible)’ is valued at K30, presumably for a single palm. This discrepancy has the potential to
cause major disagreements between landowners and licensees.
Questions were raised about the validity of including ceremonial grounds, graves and sacred
sites in a schedule of values intended to be generally applicable throughout Papua New Guinea.
There was a general feeling, shared by the authors, that items such as these have a significance
that is primarily social or cultural, and thus any cash value ascribed to them should be
determined by their socio-cultural significance to the particular community affected. It was
also felt that ‘sacred site’ is too broad a term to permit a single (guideline) cash value to be
attributed. The term has been adopted from Australia, and carries connotations that are not
always applicable in Papua New Guinea.
If such items must be disturbed, the compensation measures taken need to recognise and be
specific to the sensitivities of the affected community. In all cases it will be necessary to
discuss the impact with the community, and in some cases it may be necessary to seek specialist
anthropological or archaeological advice. Given the diversity of cultures within Papua New
Guinea, many people believe that it is not possible to generalise about the significance (or cash
value) of ceremonial grounds, graves and sacred sites.
The Valuer-General’s schedule of prices gives valuable guidelines to field staff and
landowners. Although the rates are often varied for local conditions, the values given provide a
starting point for negotiation, define the ballpark, and to a large extent provide a safety net for
licensees. If agreement cannot be reached, and it is necessary to seek third party arbitration,
possibly through a Warden’s determination, the licensee can be confident that the final
determination will be by reference to the Valuer-General’s rates and not some other criteria.
The Mining Act requires this, as does the new Oil and Gas Act.
3.2 Values
Some industry representatives expressed concern at the basis for some of the rates provided by
the Valuer-General. A coconut palm, for example, yields nuts that may have a market value as
copra, or a market or shadow value as food for human or livestock consumption. Felling the
tree deprives the owner of this value for about seven years, until a replacement palm begins to
yield. This loss of value does not appear to be reflected in the guideline value of K15. The
Mining Act does entitle landholders to compensation for loss of earnings (for land under
cultivation) and disruption of agricultural activities, but there is no equivalent in the Petroleum
Act or the new Oil and Gas Act.
The way in which some values have increased over time also raised concern about the basis of
the valuations in the first place. The 1990 value of a bamboo clump (used for building) was
apparently five times its value two years earlier. Firewood trees have maintained the same
value for ten years, but over the same period, hardwood trees have increased in value by 1,400
percent. A selection of trees and plants for which compensation is commonly paid (Table 3.1)
has apparently appreciated in value by 192 percent over the past ten years. This raises the
questions:
18 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
• What has increased by 192 percent since 1998? Is it the intrinsic, utilitarian or commercial
value of the items, or something else?
• If it is something else, what is it?
• On what basis did (and does) the Valuer-General determine values?
Table 3.1: Valuer-General’s schedules 1988-1998, selected items (in kina).
Item 1988 1990 1995 1998 % change 1988-98
Bamboo clump
4
20
20
20
400%
Betel nut
5
10
15
15
200%
Blackpalm
3.5
8
8
8
129%
Coconut (con)
10
10
15
15
50%
Firewood tree
3
3
3
3
0%
Edible karuka
3
5
8
5
67%
Sago edible
5
20
20
30
500%
Tulip
1
1
2
2
100%
Canoe tree
50
50
30
100
100%
Hardwood
4
12
12
60
1400%
Average % change
1988-90
1990-95
1995-98
1988-98
57%
-4%
94%
192%
In a brief paper presented to a CMP conference in 1994, the present Valuer-General attempted
to answer these questions by saying that the information received from various sources in the
field is screened by a ‘committee of senior valuers’ in light of five criteria: location, usage,
relative scarcity, potential income gains, and the distinction between cultivation and natural
growth (Soloi 1994). But it is not entirely clear how the application of these criteria could have
given rise to the discrepancies shown in Table 3.1.
Many years ago, Knetsch and Trebilcock (1981) observed that the ‘full opportunity cost’ of
land and subsistence resources in PNG would normally exceed their market price, and the
classification of types of loss which is embodied in legislation can be seen as an attempt to
define (if not to measure) the difference between the two. The question then is whether it
makes sense for someone like the Valuer-General to try to attach cash values to each type of
loss which comes to be recognised, or to assign a zero value to some types of loss, while
allowing others to be ‘overvalued’ in order to compensate for this. Instead of answering this
question directly, the authors went on to suggest that some portion of the ‘scarcity value’ of the
site in question, which in the present context means a share of the ‘resource rent’ from mineral
or petroleum extraction, should accrue to the customary landowners as part of their
compensation package; in other words, that they should receive additional ‘benefits’ (from the
government or the developer) to offset the potential under-valuation of their lost subsistence
resources. More recently, Jackson (1997) has argued that a schedule of the kind produced by
the Valuer-General can never accommodate the fluctuations in the values negotiated by specific
interest groups at different times and places, especially in a country where resource owners are
not accustomed to place market prices on all of their resources, and so ‘compensation values’
are bound to be site-specific, and need to be subject to regular renegotiation.
3.3 Industry, DMR and DPE attitudes
A comparison of the Valuer-General’s rates with those contained in various mining
compensation agreements (Appendix 7) suggests that the Valuer-General’s schedule of values
is used as intended – as a guideline to be varied to suit local conditions. The questionnaire
distributed as part of this study asked questions about attitudes towards the values published by
the Valuer-General. The questions and summary responses are shown in Table 3.2.
The Valuer-General’s Guidelines 19
Table 3.2: Survey Question 7 responses.
Tick the statement that most closely reflects your own opinion.
(a)
32%
Different groups of people value the same trees and plants differently, according to how they
use them and how scarce or abundant they are. It is unworkable to have a single scale of
prices, as issued by the Valuer-General. Each compensation claim should be negotiated with
the landowners on a case-by-case basis.
OR
(b)
33%
PNG needs to have a single schedule of tree and plant prices, like the one published the Valuer-
General, and every organisation should follow it. If some organisations pay more than others,
landowners getting the lower rates will complain, and force compensation rates up or disrupt
projects.
OR
(c)
20%
People and their life-styles vary from region to region, but people in the same region –
Highlands, or Momase or New Guinea Islands for example – have the same sorts of plants and
trees, and value them in much the same way. Therefore it is possible to have separate scales of
tree and plant prices for each region.
OR
(d)
15%
I disagree with all of the above, and think that ...
Note: 88 responses were received, of which three were rejected because the respondent selected two or
more contradictory choices.
Interestingly, 33 percent of respondents selected statement (b), agreeing that PNG needs a
single schedule of values and that every organisation should follow it. This tallies with the 32
percent of respondents who disagreed with the statement (in response to Question 5) that:
‘Organisations need to have flexibility in how much they pay, so they can meet landowner
expectations and prevent disruptions to their work.’
Responses to each of the options were evenly spread between the different sectors of industry
and government respondents. Some of the respondents who selected one of the first three
statements in response to Question 7, as well as those who disagreed with all of them, added an
explanatory comment. These comments included the following statements:1
• Use the Valuer-General’s price list as a guide and negotiate on a case-by-case basis.
• Strictly adhere to the Valuer-General’s rates during exploration, and increase them by
negotiation when feasibility studies are undertaken.
• Each project is different, and needs a project-specific, negotiated scale of values.
• We need to enforce the existing rules, and clearly differentiate between compensation,
compassion, and being a good neighbour.
• We need project agreements with project-specific rates for things of local value, while the
remaining items should be compensated at the Valuer-General’s rates.
• We need a range of possible rates of payment, with maximum and minimum rates, and
allowance for certain conditions under which these can be varied (e.g. population density,
proximity to villages, etc.), with the Warden as the final arbitrator.
• The Valuer-General’s rates are the base rates from which negotiation can proceed upwards,
but not-to-exceed ceiling should be placed on the rates payable for each item.
1 Some responses have been paraphrased.
20 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
• The Valuer-General’s rates are the starting point for negotiations which may arrive at
higher or lower rates for each item, but it is up to the developer to pay more than the basic
rate for the sake of good working relationships with landowners.
Slightly more than half of all of respondents selected option (b) or (c), or otherwise made a
comment generally supportive of the Valuer-General’s schedules, but several modifications
were suggested. Some 20 percent of respondents would like different regional values, and
other comments supported the idea of negotiating within a fixed range or below a fixed ceiling.
This ambivalence was also noted during interviews with field staff, where comments would
often begin: ‘The Valuer-General’s rates are good, but.….’ Despite these qualifications, many
government and industry field staff noted that the authority of the Valuer-General’s schedule is
generally accepted by project area communities. They also noted that the schedule allows rates
to be varied according to scarcity or abundance, and made various suggestions about the way in
which such variance could be limited in order to make the schedule more ‘user-friendly’.
Prior to 1992, the Mining Act required developers to pay an annual occupation fee of 5 percent
of the unimproved value of the land, or K5 per hectare, whichever was greater. This amount
was not linked to the Consumer Price Index (CPI). The Valuer-General considered that no land
in any mining tenement was valued at more than K100 per hectare, and thus the universal fee
was K5 per hectare per year. Consistent with this, land value rates formerly published by the
Valuer-General show that for 1985-86, remote Highland agricultural land of between 5 and 20
hectares was valued at K100 per hectare.
Land that is to be purchased by the State is valued by the Valuer-General. He determines the
unimproved value of the land, and where a State lease is to be issued, he also sets the annual
lease payment. In 1990, land was acquired by the State for an airstrip at Moro for the Kutubu
project. The land was then leased to CNPL, and annual rental was set at K103 per hectare
(Henton 1988).
More recently, in 1998, three parcels of land were purchased by the State for lease to the Hides
gas project. The valuation report notes that this was ‘land to be leased for a short term period
for exploration purposes’. The valuations are shown in Table 3.3.
Table 3.3: Land and annual rental values (in kina), Hides gas project.
Area (ha) Unimproved
value Unimproved
value per ha Recommended
annual rental per ha
Rigsite/laydown area
8.5320
23,000.00
2,695.73
269.57
Access road
15.2522
30,500.00
1,999.71
199.97
Watersource/pipeline
1.3344
4,000.00
2,997.60
299.76
Land values vary with the nature of the land, population density and land availability, and the
size of the parcel – smaller parcels of land attract a higher value per hectare. These values are
inconsistent with the maximum unimproved value of K100 per hectare which was used by the
Valuer-General to determine mining occupation fees until 1992.
3.4 Field application
Field interviews and information received from licensees and tenement holders indicate that,
during exploration, when compensation is to be paid for a small area (generally less than
quarter of a hectare), it is common practice to count individual trees and plants, and to pay
compensation for these with reference to the Valuer-General’s rates. For larger areas of land,
representative plots are often sampled, and a bush value (per hectare) is then calculated, once
again with reference to the Valuer-General’s rates. For all such areas, an additional amount per
hectare is often negotiated to cover any surface damage and for occupation of the land, in
compliance with the requirements of the relevant Act. The same standard values are frequently
applied to seismic or other survey lines, access tracks and the like. If a work programme
requires a large number of helipads, ‘sky holes’ or ‘drop pads’ (clearings to allow delivery of
The Valuer-General’s Guidelines 21
helicopter sling loads), the sampling method is often used to calculate standard compensation
rates per pad, applicable throughout the programme.
Where a standard rate is used, it is common practice to make additional payments for cultivated
trees or plants, for cash or otherwise marketable crops, and for a limited number of culturally
significant or frequently exploited flora. These may include betelnut, fruit and nut trees,
bamboo, black palm, and sago. The list is commonly negotiated with the landowners before the
programme starts, and varies with location, proximity to habitation, abundance or scarcity, and
local usage. Payment is again made with reference to the Valuer-General’s rates.
The practice of calculated standard average values per hectare comes about for two reasons. In
the first place, conducting a full tree and plant census in virgin rainforest can take an inordinate
amount of time. One petroleum licensee (CNPL Gobe) advised that it had carried out sample
surveys of three representative parcels of lowland vegetation, each half a hectare in area. The
surveys were conducted by two experienced lands officers (one of whom was a qualified
forester) and a DPE field officer. The survey took four days, or the equivalent of eight man-
days per hectare. This confirms the authors’ personal experience. For a programme of any
size, it would not be practical to count every tree and plant before work started.
Secondly, for many exploration programmes, it is not possible to know in advance what
vegetation is going to be damaged. Teams of up to ten line cutters are used for geological,
geophysical and cadastral surveys. The team starts work in the morning and proceeds along a
compass heading, cutting line as it goes. Rugged terrain may require deviations or
discontinuities. Depending on the topography and density of vegetation, a team may cut
between 500 metres and one kilometre in a day. In the mid-afternoon, a helipad and fly camp
site is located and cleared. The helicopter than picks up the fly camp from the previous day’s
location and flies it into the new helipad, together with food supplies and possibly water.
Depending on distance from the base camp, one helicopter can support four or five line cutting
teams in this way. It is not uncommon for two helicopters to be used, with eight or ten line
cutting teams working simultaneously on different lines. Few companies have enough
experienced lands officers to accompany each team, and it is not possible to know in advance
exactly where the line will be cut, or where each helipad and fly camp will be located. Under
these conditions, it is impossible to count trees and plants before they are cleared.
As discussed below, all mining compensation agreements which we have sighted make
reference to the Valuer-General’s guideline values, and in practice they are widely used by
petroleum explorers and developers. The new Oil and Gas Act requires petroleum licensees to
assess compensation with reference to the Valuer-General’s schedule. Some mining
compensation agreements additionally list plants and trees ‘of particular value’, for which rates
are listed which, although derived from the Valuer-General’s schedule, often vary from it. This
list formalises the identity of those plants for which payment is made in addition to the standard
per hectare rate during exploration. Appendix 7 shows the extent to which the results differ
from the Valuer-General’s rates.
As already noted, project area communities generally respect the authority of the Valuer-
General’s guidelines. It was suggested by several industry field workers that the guidelines
should extend to offering indicative values per hectare for vegetation cleared by explorers or
developers. These could be used to derive standard area-based values for helipads, for line or
track clearing, or for similar field programme activities. There is a wide disparity in the
extrapolated amounts per hectare which are actually paid by a number of companies during
exploration and development (see Appendix 8). This disparity makes it impractical to
recommend an empirically based standard rate (or set of rates) for inclusion in the Valuer-
General’s schedule. Nevertheless, the schedule could include a note authorising per hectare
bush damage payments based on adequate field sampling using the Valuer-General’s individual
tree and plant values.
The Valuer-General’s schedule might also be extended to include some form of guideline for
compensating the owners of cultivated land on a per hectare basis, rather than following the
usual practice of counting individual plants, because there may be circumstances in which the
22 Landowner Compensation in Papua New Guinea’s Mining and Petroleum Sectors
relevant parties could agree to use this method to their mutual satisfaction. It might also help to
avoid such cases of ‘misvaluation’ as the one recorded by Burton (1997: 124-5):
At Ningerum in 1992, the mining warden adopted a figure of K270 per garden, a flat-
rate figure that: (a) fails to specify a benchmark area in hectares for ‘a garden’; and (b)
does not distinguish between types of garden containing crops or fruit trees of widely
differing values. If the warden did see no inequality in this, there is no doubt that
villagers did, as on 8 August 1992, within three days of the payments, those who were
underpaid, or not paid at all, erected a roadblock on the Tabubil-Kiunga highway.
Indicative per hectare values for different types of cultivated land would not exclude the
itemisation of ‘economic plants’, but could be used as a way to ensure that all the people who
take on the responsibility for valuation in the field are aware of the range of values which a
process of itemisation might be expected to produce.