PNG LNG landowner royalties – why so long?

Liquid Natural Gas tanker (Flickr/Lens Envy CC BY-NC-ND 2.0)
Written by Sam Koim, Stephen Howes

The recent protests by Hela landowners and their latest ultimatum in relation to their non-receipt of royalties and other benefits have the potential to derail PNG’s prestigious and important LNG project. But they also beg the question: how did it come to this? How is it that after more than 200 ships of LNG have left PNG’s shores no royalties have been paid to landowners? How can the situation be resolved, and what are the implications for future projects?

These are important questions on which there is little informed public discussion. This blog post seeks not to blame or to take sides, but simply to clarify the basic facts around these complex issues. Although we focus on royalties, some of the issues also apply to the distribution of other benefits associated with resource projects.

Social Mapping and Landowner Identification Studies (SMLISs)

One of the primary preconditions for the grant of a petroleum licence is for the licensee (developer) to undertake Social Mapping and Landowner Identification Studies (SMLISs) – see sections 47 and 63 of the Oil & Gas Act 1998. These studies need to be done before the Development Forum for the project – a convening of all parties who will be affected by the project (section 48). The SMLISs are not public documents, but there are various benefit agreements and government decisions dating back to 2009 making reference to these SMLISs for the various project license areas having been completed.

Landowner determination

The Act gives responsibility to the Minister to determine the local beneficiaries of a petroleum project (section 169). The SMLIS is one among a number of things that the Minister can take into account when making the determinations (section 169(4)). That determination is meant by law to happen before or during the Development Forum or Fora. At the PNG LNG Development Fora (there were various, held in 2009), it was agreed how the benefits would be divided within each license area between clans. However, this division of royalties was never gazetted. Rather, there was an agreement in the various benefit sharing agreements that the beneficiaries would become Incorporated Land Groups (ILGs) and that to facilitate the incorporation of groups the government would “establish an inter-agency task force to be known as the PNG LNG Land Group Incorporation and Clan Vetting Tax Force comprising officers from the Departments of Lands and Physical Planning and other relevant state agencies.” Thus was born the Clan Vetting Process.

Clan Vetting Process (CVP)

Clan Vetting is not mentioned in the Oil & Gas Act. According to the benefit sharing agreements, it is coordinated by the Department of Petroleum and Energy (DPE) with the aim “to identify, coordinate and facilitate incorporation of land groups for each affected clan or sub-clan identified within the license area in accordance with the Land Groups Incorporation Act 1974”, and with the work to be concluded by February 2010.

Yet so far only a few benefit determinations have been gazetted (late last year), relating to the pipeline license areas rather than the gas fields themselves. They are called “interim” determinations and make reference only to “beneficiary clans” not to ILGs. In hindsight, it would have been better, and in accordance with the law, not to consider the Development Fora concluded, and thus not to start construction, until the ILGs had been created, and the final determinations and gazettals made.

It is unclear why Clan Vetting has taken so long (almost seven years longer than expected, and counting), but two factors have now come into play making the CVP more difficult, and indeed making it unclear whether it will ever be concluded.

First, the requirements to register an ILG were tightened up in the 2009 Land Group Incorporation and Land Registration Acts. For example, to register an ILG you now need a complete membership list, and birth certificates for all members. That is a much higher bar for registration, and it is unclear how it will be met. (The SMLIS studies don’t have the names of individuals, and many of them will lack birth certificates.) The new rules came into force in 2012, meaning that they apply now.

Second, over the last few years the judiciary has got increasingly involved with the issue of beneficiary determination, and has started to challenge the CVP.

Judicial involvement

Some who claimed to be PNG LNG landowners appealed to the courts, as early as 2010, that there were wrongly missing out on benefits. We understand that these appeals related not to royalties, but benefits like land compensation and infrastructure development grants which are paid during the construction phase. These cases eventually led to a Consent Order of 21 April 2015 being signed by the lawyers of the PNG Government and the various landowners to submit to field-based mediation in a number of the license areas. This Alternative Dispute Resolution (ADR) approach commenced in 2015 under the leadership of Justice Kandakasi, but is not complete. We understand that it is now stalled or at least slowed down due to funding shortages. We are not aware of any landowner determinations being agreed to by the various parties as a result of mediation.

But the CVP is also stalled, because the Courts have ruled that it is “without statutory foundation and null and void”. The Courts also issued an order restraining DPE “from conducting any clan vetting exercise or landowner identification process”. (Both orders are mentioned in a 21 July 2016 Court Order, which refers to earlier Court Orders along these lines.)

Future LNG projects

The judiciary has already intervened in the P’nyang LNG project, referred to by some as the expansion project, which Exxon-Mobil is promoting. A landowner went to the court to stop the Development Forum for this project (presumably for fear that s/he would miss out on benefits).  The National Court provided the injunction and in a ruling of 27 May 2016 (Bernard v Duban [2016] PGNC 121; N6299 (27 May 2016)) Justice Kandakasi gave detailed guidance as to what an SMLIS should include, in particular a listing of individual landowners. (Earlier SMLISs had not been that detailed, and no regulations have ever been published defining the content of an SMLIS.) Indeed, the main grounds for the injunction on the Development Forum seem to be the lack of confidence on the part of the Court that the SMLISs meet its required standards. (The Court also referred a constitutional issue to the Supreme Court relating to the extent to which provincial governments need to be consulted in relation to resource projects under the provisions of the Organic Law on Provincial Governments and Local-Level Governments.) This ruling is now being appealed.

Stalemate

It seems that the state is prevented from deciding which landowners should receive how much royalties because the protracted CVP it has been undertaking to make such a decision has been stalled by the courts. But the court ADR process is also stalled due to lack of funding.

It is unclear how this stalemate will be resolved. It would appear that the government has lost faith in the ADR process, and that the courts have lost faith in the government CVP. Presumably, since the ADR process is voluntary, the government could withdraw from it. Moreover, whether the developer undertakes the SMLIS or the courts make a ruling, it is the Minister who ultimately discharges the statutory obligation by making a determination as to who the real project area landowners are. There is provision in the OGA that the SMLIS and court decisions are among the factors that should be taken into account when making the Ministerial determination (s.169(4)). There is also a provision for making a determination even at this juncture, that is, after the commencement of the project (s.169A). Presumably, a determination could be made now, without any further Clan Vetting. However, it is not clear how ILGs could be incorporated; and if the determination related to groups other than ILGs then the various project benefit sharing agreements would need to be re-written. Moreover, if a determination was made, it might be open to any landowner to go to courts to get an injunction on the basis that the courts have said that the CVP already undertaken is without legal foundation.

PNG is keen to pursue further LNG projects but they might well get delayed given the position that the courts have taken which make it impossible to hold a Development Forum unless much more detailed SMLISs are undertaken than have been to date. Even if these are undertaken, if they are challenged in the court, further delays could follow. Clearly, a much speedier process is needed for the creation of ILGs.

Going forward, it is not clear what the solution is. One suspects that the issues will have to be elevated to the Supreme Court. But even if the current round of issues before the courts is resolved, there is much work to be done by the government before determinations can be finalized and royalties flow. Such important issues of public policy would benefit from more public discussion. It is to that end that we have written this article. Much more analysis is needed. We invite your comments and feedback.

Sam Koim is the former Chairman of the multi-agency anti-corruption body Taskforce Sweep and Principal Legal Officer at the Department of Justice and Attorney General, Papua New Guinea. Stephen Howes is Director of the Development Policy Centre.

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Sam Koim

Sam Koim is a Papua New Guinean lawyer whose career has focused on anti-corruption efforts. He was a Principal Legal Officer at the PNG Department of Justice and Attorney General, before becoming Chairman of Investigation Task Force Sweep, PNG’s multi-agency anti-corruption body. He is also a Council Member of the Papua New Guinea University of Technology.

Stephen Howes

Stephen Howes is the Director of the Development Policy Centre and a Professor of Economics at the Crawford School.

34 Comments

  • Thank you john for your comments. I think that your analysis is basically correct. It seems to me to be important that the basic issues relating to developer legal compliance, especially in relation to landowner issues, be resolved rather than left hanging. I also think that the PNG judiciary deserves great credit for its capacity to bring well-reasoned decisions to bear on the issues.

    It’s worthwhile looking into the background to the current issues in more detail.

    Why was the Gas to Australia project abandoned? One reason was that the Australian energy security crystal ball-gazers did not like the fact that Australian energy security might become dependent on PNG landowner satisfaction. The PNG mother would be feeding the Australian energy child through the umbilical pipeline. Needless to say SANTOS and Woodside were standing in the background here. There were other reasons, including misgivings by the ADB (counter party financier for GoPNG JV equity participation) that OSL/ExxonMobil were properly addressing O&G Act compliance issues in relation to SMLIS and more generally as to the planned project’s ability to contribute to the alleviation of poverty on a nation-wide basis. Other misgivings emerged from the New York-based sovereign risk analysis done in conjunction with the bankability studies as to whether or not OSL/ExxonMobil would successfully manage the project’s landowner interface over the long term.

    In the early 2000s when the legal significance of the Hides Gas Case (1992/4) decision was pointed out by DPE to OSL/ExxonMobil it was airily dismissed with the comment “the judge got it wrong”. The DPE was told by OSL/ExxonMobil that the developer had engaged “world class anthropologists to do social mapping to an international standard” and the fact that the SMLIS reports began and ended with the statement that it was impossible to identify landowners would have to be accepted by the DPE. At the same time OSL/ExxonMobil organised with the PNG Chamber of Mining and Petroleum opposition to the making of a DPE drafted Social Mapping and Landowner Identification Studies Regulation.

    Why would the developer take up this position? Was it a blunder caused by ignorance and insufficient respect for the laws of PNG? Perhaps all of this and more?

    I think the answer partly lies in the developer’s reluctance to get involved in what it sees (or saw then) as ‘social engineering’. The anthropologists’ SMLIS reports gave the developer ‘push-back’ against GoPNG. In other words the reports made it appear that the identification of landowners and management of landowners’ concerns was solely the government’s problem. By taking up this position the developer discreetly supported a common outsider view that landowner issues can be characterised as riddled with ignorance, greed, corruption, fraud, delusions, con-men, an inefficient and ineffective public service, and corrupt politicians.

    This strategy has, to some extent, backfired on ExxonMobil. ExxonMobil did not appeal the P’nyang decision because, had it done so, it would likely have been faced with a very strong rebuttal argument of estoppel. It is for this reason that I conclude that the issue of DPE “acceptance” of the developer submitted SMLIS reports is not dispositive and that to cling to this point is to miss the point.

    To gain a better understanding of the present position it is necessary to look more deeply into the customary law issues and the not un-related issues of payments and transaction costs relevant to all parties – landowners, developer and government.

    The Hides Gas Case is described as a ‘landmark decision’. It is so not because it establishes a precedent. The Land Court is not bound by precedent – there is no doctrine of stare decisis. Instead the Case establishes a policy of considering a range of matters under the heading of ‘earmarks of ownership’. These headings function as guidance for the Land Court mediators and Magistrates when addressing the issues raised by the parties to any dispute. However, the overall policy of the Land Court is first to seek resolution by mediation and by statutorily mandated ADR. As Justice Kandakasi indicates it is expected that the Land Court will only very rarely move towards a decision. The reported Land Court decisions fell away very quickly after the adoption of ADR. Mediated agreements are not subject to reporting.

    I will make a crude summary of Land Court procedure following the dispatch of a mediator to the site of the dispute.

    Rule 1. Stop fighting.
    Rule 2. Start talking.
    Rule 3. Keep talking until you agree what you agree about.
    Rule 4. Keep talking until you agree what you disagree about.
    Rule 5. Keep talking until you decide how you can reach an agreement.

    In the event that the both the Magistrate and the mediators have concluded that mediation has been exhausted and that the parties are deadlocked only then may the Magistrate (assisted by the mediators) move to a decision. The judicial decision must be a reasoned one that applies the concepts of equity and fairness in a manner that addresses the concerns of the parties and appeals to the concept of custom and principles that the parties have brought to the dispute. For an example of a brilliantly-reasoned judgment see Gerato v Konnou [2007] PGLLC 1; DC602 (6 June 2007).

    From this brief description it can be seen that the PNG Land Court performs its essential functions without benefit of statute and precedent. Some other examples of law courts functioning in this way can be found in pre-1959 Tibetan law and Islamic jurisprudence (especially the Maliki school). Examples of judicial reasoning based on equitable principles and without benefit of statute or precedent can be found in a number of anthropological publications and in the reports of the Judicial Committee of the Privy Council.

    At this point it’s necessary to mention the role of ILGs and genealogies. Issues in relation to customary land sometimes involve individuals but most often involve groups of people. The main role of genealogies is to establish and confirm that the Court is dealing with a self-defined group. Beyond this there is little probative value attached to genealogies. Eighteen generations does not automatically trump three generations, absent an agreement between the parties. It’s important to note here that the PNG Law Reform Commission sponsored amendments to the ILG Act suggest that three generations are sufficient.

    There are other good policy reasons why both the Government and the Judiciary are reluctant to include the concept of the ‘genealogical footprint’ within the compass of land legislation and Land Court decisions, absent agreement of parties.

    The next issue is transaction cost. Earlier payments, in the Chevron era, to Port Moresby-based landowner leaders were most unsatisfactory. Some landowners complained that they received very little money and sometimes none at all. Village-based people faced huge transaction costs when they attempted to address this problem. The DPE then adopted the policy of payment in cash in the village to a nominated person. Doing so substantially increased the transaction cost to the government whilst greatly reducing the transaction costs for the landowner. The use of ILGs as payment destinations both simplifies and reduces the transaction cost for the payer (be it developer or government). But it does involve questions of ILG maintenance.

    What is at issue here is not just the identification of landowners but also the continuing legal necessity to make payments to entitled recipients. The Supreme Court has provided a timely reminder that the appropriate legal steps must not only be taken to identify landowners, but also to legally pay them not just once but throughout the life of the project. A form of fiduciary responsibility or obligation held against both developer and government.

    Why should the Court be sending us this message?

    There are many policy reasons, including some from the political economy of development, but I shall just address a central legal reason. This is that within the PNG legal pluralism universe there are two concepts of property. On the one side we have the ‘state’ system where the existence of property is established by the production of texts and documents. This is especially true of land where ownership is confirmed by certified copy of an entry in a register and reinforced by statutory indefeasibility. On the customary land side there are no documents. In regard to customary land matters what is applied by the Courts is a doctrine of ‘appearances’, derived from the testimony of the parties. For example, undisturbed occupation of land for twelve years creates a presumption of ownership. In this context the appearance of ownership is ownership. It’s a curious fact that a few years after the adoption of the Napoleonic Code which firmly established an absolute textual basis for all property claims the Cours de Cassation invented the judicial doctrine of ‘appearances’ in order to overcome certain problems caused by positive law.

    From the viewpoint of the Court the relations of payer/payee or debtor/creditor are relatively simple and often well-understood by the parties in the State sector paper-based system. But this is not so for rural landowners who face high transaction costs when things go wrong. It is very appropriate for the Court to remind us that creating a Social Licence to Operate depends on the conjoint fulfillment by developer and government of their responsiblity to identify beneficiary landowners and that sustaining this Licence will depend on the developer and government continuing to meet their conjoint responsibilities to beneficiary landowners throughout the long life of the project.

    Cheers,

    Vailala

    • Hi Vailala,

      All discussions are very relevant and good for the government, project developers and landowners to take note and comply where necessary.

      It is however very clear that Exxon Mobil and Government did not complying with Section 47(5) requirement of the Oil & Gas Act.

      The courts decision to do ADR/Mediation is consistent with this law and decision of the national and Supreme court are final.

      In this instance, the National Court has ruled that Landowners have not been identified. This is the reason why the ADR/mediation is conducted for identification of landowners and getting them to form ILGs enable landowner benefits to be channelled through for equitable distribution.

      ILGs formation is requirement by law for benefit distribution and so it is really the requirement under Section 47(5) that matters in this case.

      Further, if Exxon Mobil is yet to comply with this law which is a pre-requite for the PDL, how did Exxon Mobil get the PDL and is it operating within legal license requirement. Does the world needs to know this?

      As a social engineer, I have developed a model called – ‘Tambiabu Model’. There are four model companies use now and they are all reactive approaches and subject to companies to use their discretion under the Corporate Social Responsibility (CSR), programs.

      The one I have developed is called Tambiabu model and it is bottom up approached and considers all aspects of Social licensing. The framework of the model is been applied gradually in mining areas.

      Anyhow, what is happening is that landowners are serious about complying with the law but Exxon Mobil and State are not adhering to relevant provisions with in the parameters of the law we operate in.

      It is certainly an insult to our intelligence, which may or leads to invite “mobilized community resistance and jungle justice” and the writing is on the wall.

      regards

    • Thank you ‘Vailala’ for such an erodite summary of some of the complex legal elements involved, including the longer-term responsibilities for maintaining the social license and the political economy around transaction costs. The chosen pseudonym was most apt, presumably referencing the Vailala Madness cargo cult which operated in Papua between 1919 and 1922. There does indeed seem to be a cargo cult madness in this experience by ExxonMobil and Oil Search, where “DPE “acceptance” of the developer submitted SMLIS reports a DPE endorsement’ was assumed dispositive (thanks for new Scrabble word) and enough to extract the cargo of LNG riches. The cargo has started to flow for these companies, but it may be madness to assume this will continue without a just settlement for landowners. With respect Paul Flanagan

      • Paul/Vailala,

        People in my village that was discovered in 1960s are now using computers and communication is very easy. one can speak to a villages in a hamlet from anywhere in the world, which was not the case in early days where cargo cult mentality was built in to get into the villagers world.

        Today, many of the villagers children are pilots, engineers and social engineers like myself.

        People now know what it development, what is cargo cult , what is batter system what is politics and so forth.

        They know their rights through the law but applying and accepting the law is the problem.

        Our constitution and number of laws including the Oil & Gas Act and the ILG Act was developed by Papua New Guineans for our people and for everyone living in Papua New Guinea and in the interest of the State.

        Many village people know how to following customary law and respect for each other and their rights.

        For development purpose people will follow and a re following modern laws and in this case is the ILG Act and the Oil & Gas Act.

        The problem is the government with its want capacity and apt skills and experience.

        The company has what it needs to develop huge project and know very well the weakness of the government and the villagers.

        In the circumstance our constitution and the laws protect our people and it is the common ground where we all can agree to do the right thing even when the other party is weak.

        They discretion is now on the government, company and the landowners to follow law as any disputes will earn up in the Court and the court will rule based on law.

        In this instance, the law we have in PNG for developing Oil & Gas (petroleum) is the Oil & Gas Act and in mining the Mining Act. However, there is only one ILG Act which both industries utilize for their purposes.

        Here Exxon Mobil, DPE (State) and landowners are important in developing a project. However, the PNG LNG Gas Agreement was signed on 22 May 2008 without the Landowners and in Section E (15) they claim that Social Mapping & Landowner Identification studies was done in compliance with Section 47 of the Oil & Gas Act.

        The landowners disputed Section E(15) of the PNG LNG Gas Agreement and took matter to Court.

        The national Court un OS 546 of 2010 ruled in favour of the landowners and it orders ADR/Mediation.

        The ADR/mediation started in 2015 but due to lack of funding its pending completion.

        Really it is Exxon Mobil’s role to under law to comply with Section 47(5) of the Oil & Gas Act, but its failure to comply with that is causing two things:

        1) Landowners benefit has been delayed
        2) Exxon Mobil does not have legal license as Social Mapping and landowner identification is the pre-requisite to granting of the PDL to any company, including Exxon Mobil.

        In sum, Exxon Mobil can blame itself for any mobilize community resistance and jungle justice for continuously causing so much pain and insulting the villagers intelligence but not complying with the law of this land.

        Exxon Mobil needs a social engineers from the village (I can provide that) if this is very difficult to understand.

        Right now, Exxon is operating under all the confusion it caused with so much money floating around. When all that money run dry and people who benefited from that arrangement are no longer there, gaps are created/opening up Exxon Mobil is seen the real people it must dealt with for project security and social licensing until the project closes voluntarily and ADR/Mediation process is identifying people Exxon Mobil must work with.

        Below is a ruling on similar case between a landowner Rimbunan Hijau:-

        PAPUA NEW GUINEA
        [IN THE SUPREME COURT OF JUSTICE]
        SCA 126 OF 2011
        BETWEEN:
        RIMBUNAN HIJAU (PNG) LIMITED
        Appellant
        AND:
        INA ENEI on his behalf and on behalf of Moga clan of Loupom Island, Abau District, Central Province
        First Respondent
        AND:
        PUBLIC CURATOR OF PAPUA NEW GUINEA AS REPRESENTATIVE OF THE ESTATE OF IBI ENEI (Deceased)
        Second Respondent
        Waigani: Salika DCJ, Kandakasi & Toliken JJ.

        30. Kandakasi J., in his decision in the P’Nyang and Kanga Kawira cases correctly calls them “fraudsters and thieves.”[27] As was noted by his honour in his judgments, the PNG LNG project presents a clear case on point. In this project, despite s. 47 of the Oil and Gas Act, both the State and the developers have failed to properly identify the true and correct landowners, properly organising them into ILGs, enable the landowners to fairly and meaningfully enter into negotiations with the developers and the State and for the developers and the State to seek and secure from the true and correct landowners through their duly elected or appointed leaders the landowners free and informed consent and approval and ultimately, their social license to operate. The contracts or agreements and the deals the State and developers enter into with persons not properly identified and appointed by the landowning clans, or groups, remain null and void ab initio or void and of no effect from the very beginning. Given that, when the true and correct owners eventually assert their ownership rights and exercise their rights, challenging the contracts or deals with the fraudsters and or thieves, they must give way. Such contracts do not bind the true and correct landowners. If need be, the State and or the developer concerned need to enter into completely new contracts with the true and correct landowners on terms that are fair and reasonable with reasonable compensation being paid for the earlier illegal entry, occupation and conduct of their businesses.
        ……………………

        The above supreme Court ruling makes reference to Section 47 of the Oil & Gas Act and the PNG LNG case ADR/Mediation is leading toward above ruling.

        It is never too late to discuss the social licensing aspect of project operation than the legal licensing process as the law is very clear and Exxon Mobil and the State failed from the onset.

        regards

      • Thank you Paul for your generous comments. Answering the question ‘why so long?’ required that the SMLIS issues be discussed in some detail and outlining the role and place of customary law in the PNG jurisdiction.

        It is certainly true, as you suggest, that there is much that also needs to be said about the related issues of payment of beneficiaries and transaction costs when considering the impact of the LNG Project on landowners. How payment is made and to whom has a considerable impact on equity issues and the welfare of women and children.

        It is heartening to note that GoPNG proposes now to move rapidly to revise the O&G Act and improve the regulation of the petroleum industry.

        The EITI Board has announced its reporting intentions and has bravely set about the task by describing landowner beneficiary recipients as beneficial owners (BOs) of the LNG Project and taken on the task of compiling the lists. The PNG Supreme Court has indicated that it may find that a fiduciary relationship obtains between the LNG Project Joint Venture parties and the landowners. It’s possible that the continuing participation of some landowners in the LNG Project will, after small-field depletion, be resolved by landowner equity participation. Perhaps the Hela Provincial Government, as the recipient of substantial project benefits may, in addition to making infrastructural investments, also make direct cash payments to non-BO Hela persons.

        The LNG Project does now stand in need of a political economy analysis and assessment.

        Thank you Sam and Stephen for asking the question ‘why so long?’

        Vailala

        • Thank you Sam and Stephen and for raising the question and the discussions which to some extent were educational. It brings out the facts of the matter – why so long.

          To answer this question, it is important to look at the law. The law under section 57(5) is very clear on who is supposed to be undertaking the Full Scale Social Mapping and Landowner Identification Studies (FSSMLIS). It is the licensee (Exxon Mobil).

          The State through DPE did not vetted the work done by Exxon Mobil and accepted what was done and given. It is understandable, DPE has capacity issues and so poor work was done on vetting the work Exxon Mobil submitted.

          The matter was brought to the courts and the national Court ruled in favour of the landowners and the ADR/mediation process is pending completion.

          This means landowners are yet to be identified so people can start to receive benefits including royalty.

          The channel for distribution of benefits is the ILG and when the ILG process is employed properly, every landowners will benefit and social license will be provided by the process enabling people benefit directly.

          The problem now is that crooks are not providing funding for the ADR/Mediation completion which will ultimately require ILG form.

          Formation of ILG will mean some of the so-call landowner leaders Exxon Mobil deals with now will be definitely exclude and this means loosing their Status as well.

          For this reason some landowners benefiting now will not support the ADR/Mediation processing as the ILG process will definitely bring out the genuine landowners and exclude some crooks who are benefiting now.

          Considering this brief background and the law as it is, any laymen can conclude that Exxon Mobil is responsible for the long wait and the government been partners in the project cannot say much as there is conflict of interest, as the government has equity in the project as well.

          It is such reason why governments of some countries do not carry out business but rely on tax revenue and other sources of revenue for government operation.

          In the circumstance the people suffer the most and these discussion is not isolated anymore.

          The petroleum Minister Hon. Dr. Fabian Pok confirmed this during the 2nd PNG Petroleum Energy Summit on Tuesday 20 March 2018 (The national News Paper, page.3).

          In sum the answer to – why so long, is that there appears to be conspiracy between the State and Exxon Mobil to do wrong, it is the reason.

          To this end, thank you for the discussions and lets hope Exxon Mobil will soon realize the potential for project disruption it is creating as a result of its failure to comply with Section 47(5) requirement of the Oil & Gas Act, the law we all really on for identification of genuine landowners for project benefits to flow through and reciprocation of PNGLNG project smooth operation.

          regards

  • Thanks for the recent comments. It’s too bad that the problem as we analyzed it more than a year ago still persists.

    As we say in our post, SMLIS studies were carried out in the late 2000s. But they are only an input into the beneficiary determination process. According to the Oil and Gat Act (Section 168) the determination of local beneficiaries of PNG LNG royalties by the PNG Government should have been made before the Development Forum for the project was completed. But that means it should have been in 2009! Unfortunately, that part of the law was not complied with. I’m sure back then no-one would have thought that eight years later most of the determinations would still not have been made. Kicking the can down the road might have seen like a good idea at the time (to avoid project delay), but in retrospect it seems like a huge mistake. Back in 2009, there were no court challenges. And no build up of expectations. How this issue will be resolved now is not at all easy to see.

    • Stephen,

      Agree – the project is operating on assume social license and blackmail. The law states the “licensee” must do the SMLI (PRL – preliminary, PDL – Full-scale) SMLI.

      The question is who is the licensee, as the State (DPE) is the regulator. Obviously Exxon Mobil is the licensee.

      Thus, when Section 47 (5) of the Oil & GAs Act is enforced, Exxon Mobil does not have license now as currently SMLI is yet to be completed.

      A huge blunder and right now from a layman’s perspective, Exxopn Mobil is stealing – period.

      • Hi John,

        My understanding is that Exxon did so the SMLISs required back in the 2000s, and that they were signed off by the government. The problem is that the government didn’t then do the determination of landowner beneficiaries. If the government wasn’t happy with the SMLISs it shouldn’t have accepted them, and none of the parties involved should have allowed the project to go ahead before the government had made its landowner beneficiaries determination.

        Regards, Stephen

        • Hi Stephen,

          The legal license requirement is very clear and there is no ambiguity in the law under Section 47(5) of the Oil & Gas Act which reads: –

          “if a licensee or a person makes an application for a Petroleum Development License under Section 53, the licensee shall submit with that application a Full-Scale Social Mapping Study and Landowners Identification Study of Customary Land owners in:

          (a) The license area of that petroleum development license; and
          (b) Other license areas, including pipeline areas, which pertain to that petroleum development license and
          (c) The land within five kilometres of any facility which would be a dedicated project facility (other than a facility which would be situated on such a petroleum development license) of the petroleum project; and
          (d) Other areas which would be affected by the petroleum project if developed”

          Over the years, there was no Full Scale Social Mapping and Landowners Identification studies (FSSMLIS) done in Hides but it operated on a court decision between the Hiwa and Tuguba tribes. Hence, they had agents which represented tribes in Hides and Petroleum Development License (PDL) was granted without a FSSMLIS done.

          In the PNGLNG project the State and Exxon Mobil signed the PNGLNG Gas Agreement on 22 May 2008 and under Section E(15), it confirms that social mapping and landowner identification study was done and there was number of PDL gas fields covered in the agreement including PDL 01 (Hides). The agreement also includes Petroleum Retention License (PRL) status gas fields and they includes Hide 4 (PRL 12) now PDL 07, Angore PRL 11 (now PDL 08) and Juha PRL?(Now PDL09).

          Now after the above agreement was signed in May 2008, the Umbrella Benefit Sharing Agreement forum was held in May 2009 and some aggrieved customary landowners took matter to court. Whilst the matter was registered with the courts, the License Base Benefit Sharing Agreement (LBBSA) was held in December 2009 and the last of the LBBSA forum was held for Angore on 7 December 2009.

          Meanwhile, the National Court Order OS No. 546 of 2010 rules in favour of the landowners and the alternative Dispute Resolution (ADR) mediation as Ordered. The ADR/mediation started in August 2015 and it is now pending completion. The delay is caused by funding issues.

          Stephan, there are two main issues here:

          First who is the licensee? Is it the Courts, Exxon Mobil or the State (DPE)? The law states that it is the licensees ‘role to complete the FSSMLIS. If it is Exxon Mobil, why is DPE (regulator) and Courts (ADR) involved?

          Second, if the ADR mediation is now complying with Section 47(5) of the legal license requirement and the landowners identification is yet to be completed, the courts decision under OS no.546 of 2010 automatically nullifies Section E(15) of the PNGLNG Gas Agreement signed between the State and Exxon Mobil on 22 May 2009.

          As I comment 17 January 2018, Exxon Mobil and the State through its agencies supports the ADR/Mediation process and everyone is now waiting for the government to provide funds for completion of the ADR/mediation.

          With above brief scenario of the issues, it is clear Exxon Mobil is responsible for complying with Section 47(5) of Oil & Gas Act and completing the FSSMLIS. The FSSMLIS is yet to be completed by Exxon Mobil and so, I ask the question – how did Exxon Mobil get the PDL for the PRL gas fields and other PDLs, if FSSMLI is yet to be completed now in 2018 and FSSMLI is the pre-requisite for getting PDL for any gas field.

          Hence, Section 47(5) of the oil & Gas Act is very clear and technically Exxon Mobil does not have legal license for the gas fields. It is now operating on assumed social license and blackmail.

          Further, the customary landowners are not a party to the PNG LNG Gas Agreement signed on 22may 2008 and so that agreement is not binding on the landowners. How the State regulates the industry and Exxon Mobil not complying with Section 47(5) is an issues.

          For now without the FSSMLI been done by Exxon Mobil, technically it is operating illegally and stealing the gas resources and the weakness of the State to enforce the law on it should not be an excuse.

          to this end, I think the onus is now on Exxon mobile to comply with the law, even if the State is not monitoring its compliance matters.
          regards

          john

          • Hi John,

            The government accepted in writing the “full scale social mapping and landowner identification” reports which Exxon produced back in and around 2009 .

            Regards,

            Stephen.

            • Agree Stephen, that is correct and confirm on section E(15) of the PNGLNG Gas Agreement the State and Exxon Mobil signed on 22 May 2009, but the National Court Order OS No:546 of 2010 ordered the ADR/Mediation and so in 2018 the government, Exxon Mobil and the customary landowners are waiting for funding to be provided by the State to identify the project area landowners.

              I am say that Exxon Mobil if it is the licensee – technically it does not have the legal license basically because it did not meet Section 47(5) of the legal license requirement.

              If it had done that in 2009 than that was challenged by the customary landowners and the National Court Order Os No.546 of 2010 automatically nullified any SMLIS done prior to the date when the National Court made the above decision in 2010.

              Also note that when a gas field is under PRL – only a preliminary social mapping is done. However, when the status of a license changes to PDL, a full -scales SMLI study is required as a pre-condition for PDL to be granted and as required under Section 47 (5) of Oil & Gas Act.

              Now in the current PNGLNG project agreement signed on 22 May 2009, it was an integrated project and there was number of PDL gas fields and three (3) PRL gas Fields included in the integrated project. The PRL gas fields are:

              1. Hides 4 (PR12..) now PDL 7,
              2.Angore (PRL…) now PDL 08 and
              3.Juha (PRL..) now PDL 09.

              If there was Full -Scale Social Mapping and Landowner Identification done in 2009 why is it that, landowners are yet to be identified now and the ADR/Mediation program is going on and the above gas fields remained under PRL status when the agreement was signed in 2009?

              The fact of the matter is that the law is supreme and the State, Exxon Mobil and customary landowners are not above the law.

              The challenge for the State and Exxon Mobil now is to somehow meet the Section 47(5) requirement. How it is done remains a challenge.

              In the mean time the licensee (Exxon Mobil) is yet to meet Section 47(5) requirement of the Oil &n Gas Act and therefore technically, it does not have legal license.

              regards
              john

              • I concur with John I Tambiabu’s analysis which I believe is substantially correct. I would like to add some further comments on the basic issues and how this mess came about.

                The common law doctrine of landownership as the holding of an “estate” does not apply in PNG to customary landownership. The State, it may be said, holds bare radical title to the customary-owned lands of PNG. Customary landowners hold their land, in accordance with their customs, without encumbrances from the State. Except that the State by Oil & Gas Act asserts the ownership of petroleum. The issuance of a development licence by the State to a developer for the purpose of extracting petroleum from customary-owned land and the consequent creation of a title, or property right, to this uplifted petroleum is only made good after identifying the customary landowners, securing their agreement to the development, and granting, by statute, the benefit of royalty to the identified landowners. This is a compensation for the State’s taking which is guaranteed under the Constitution and made effective by statute.

                It is important to note that the legislation establishing the PNG Land Court gives it both a narrow procedural character and a wide processual ambit. There are no legal presumptions in action as to the concept of ‘property’ and ‘ownership’. Instead the Court is under a duty to elicit from the parties whatever conceptions that the parties consider relevant to an issue. For petroleum project landowners (usually those who satisfy the ‘earmarks of ownership’ test within a petroleum ‘block’) the specific issue is the joining of a statutorily conferred benefit to a customary law-based right. The PNG legislative and juridical approach to the joining of state law and customary law is, in my opinion, highly original and well-deserving of close study by legal scholars and social scientists interested in legal pluralism and customary law.

                In the 1990s the developers OSL and Chevron (and later ExxonMobil) decided for odd reasons to disregard the laws of PNG and not disclose the personal identity of petroleum ‘block’ customary landowners to the Department of Petroleum and Energy (DPE). Additionally, OSL and Chevron (and later ExxonMobil) continued to submit to the DPE SMLIS reports that described customary landownership in terms that were both unanchored in PNG law and adverse to PNG law. In response the DPE proposed an SMLIS regulation that was intended to rectify the obvious shortcomings of the developer submitted SMLIS reports. OSL (and the PNG Chamber of Mining and Petroleum) opposed the making of this SMLIS regulation.

                I believe that the Clan Vetting Process was devised by the DPE in order to overcome the obvious shortcomings caused by the developers refusal to comply with the statutory requirement for landowner identification studies in a manner consonant with and cognizant of the laws of PNG.

                Looking at the contemporary situation there should be no surprise that Justice Kandakasi chose scathing terms to describe the shortcomings of the SMLIS statements that were tendered to the Court in the P’nyang Case. It is also unsurprising that his Honour concluded that without the basic PNG legislative requirement for full-scale SMLISs being satisfied the developer has neither met the development licence issuance requirements nor gained a ‘social licence to operate’ by way of the ‘prior and informed consent’ of legally identified project affected landowners.

                Accordingly, the developer (and the Australian-based consultants who prepared the reports that were tendered in the P’nyang Case) may be described as having insufficient respect for the laws of PNG. It may also be the case that the developer is in breach of World Bank/IFC and Exim-Bank loan conditions which require compliance with the laws of PNG. The fact that the DPE received the defective SMLIS reports does not absolve the developer from all responsibility in this mess.
                In my opinion it would be unconscionable for ExxonMobil to now claim that they have played the game without fault on their part.

                I note that ExxonMobil has publicly signalled its support for the ADR process initiated by Justice Kandakasi. As it must.

                • I’m glad that this article continues to generate interest, but I continue to beg to differ. Exxon prepared the required studies. The government didn’t only receive them; the government accepted them. So I don’t think you can blame Exxon for not doing the studies or not doing the right type of studies. Where I think all parties are at fault is in proceeding with construction without a determination as to who the relevant landowners are. That’s against the law, and I think that should be the focus rather than the studies, which, however, inadequate you might think they are, were completed and accepted by the government.

                  • Stephen, you are right in that the State and Exxon Mobil reached an agreement and they signed the gas Agreement on the basis that Social Mapping landowner Identification Studies was done as per Section E(15)of the PNGLNG GAs Agreement.

                    What I am saying now is that the national Decision OS No.546 of 2010 nullified that particular Section as Exxon Mobil as the Licensee did not comply with Section 47(5) requirement of the Oil & Gas Act.

                    Exxon Mobil and the State did not appealed the National Court Decision and the ADR mediation is progressing in Angore PRL 11/PDL 08 as we have this discussion.

                    Therefore, pending the completion of the ADR/mediation Exxon Mobil as the licensee is yet to comply with Section 47(5) requirement of the Oil & Gas Act.

                    That is why I insist that Exxon Mobil is operating with out legal license. DPE also agrees that Exxon is yet to comply with Section 47(5) requirement and copy of the news paper article by the current secretary was sent to you via your email/gmail.

                    it is an issue Exxon Mobil need to sit down with genuine landowners and talk social license as legal license is too costly and may not be easy to reach.

                    As social engineer, I can assist in this regard if Exxon Mobil can agree on working through the social licensing process.

                    regards

                    john

                  • Thank you Stephen for your comment. I am in broad agreement with your view that the LNG project should not have proceeded without prior identification of landowners, an issue of legal significance to all parties. The issue of reception/acceptance is not, I think, in this instance dispositive.

                    What is at issue is not whether I think the studies were inadequate but instead whether or not the submitted studies supported the legal parameters for landowner identification and facilitated a legally sound Ministerial determination. On this point I believe that the developer (and their consultants) proved resistant to advice and unswayed by persuasion, preferring instead to pursue anthropological truths. The result has been a train wreck and, understandably, there are a number of people who don’t want to read the accident report.

                    The Rimbunan Hijau Case conveys some salutary warnings. Firstly, it defines the SMLIS obligations (i.e. the need to identify landowners) as con-joint to both developer/exploiter and government. Secondly, it implies that there is a continuing obligation on the part of the developer/exploiter/government to ensure that the properly identified landowners are paid their entitlements. Thirdly, the Court has given notice that it is open for the Court to find that the joint venture parties (which includes the State) may have failed to either create or maintain a ‘social licence to operate’.

                    This latter point is of considerable importance in the context of the general debate about natural resource development policy in PNG.

                    Cheers,

                    Vailala

                    • Vailala,

                      Thank you for your thoughts.

                      The oil & Gas Act Section 47(5) is very clear on who was/is responsible for Full Scale Social Mapping and Landowner Identification Studies (FSSMLIS).

                      The provision of this Law confirms that the Licensee (Exxon Mobil) was responsible for the FSSMLIS but it (Exxon Mobil) failed to comply with the legal license requirement and somehow got the Petroleum Development License (PDL) without undertaking the FSSMLIS.

                      The government through its agencies also agreed with Exxon’s application for the PDL despite the Exxon Mobil not meeting Section 47(5) requirement.

                      It is all wrong here, if everyone including the government was to follow the laws.

                      The landowners then took the matter to court and under OS No.546 of 2010, the national Court Ordered the ADR/Mediation to be conducted for identification of landowners and their land to meet the Section 47 (5) requirement.

                      The State and Exxon Mobil did not appealed the National Court Decision and now the state is yet to provide funds for the ADR/Mediation to be conducted and as we discuss, DPE is said to be organizing logistic and making other travel arrangement.

                      What Exxon Mobil and state failed to realize is that the national Court order automatically nullified Section E(15) of the PNGLNG Gas Agreement which the State and Exxon Mobil signed on 22 May 2008.

                      Therefore, if the FSSMLIS is the pre-requisite to obtaining the PDL license, technically and legally Exxon Mobil is operating illegally and the onus is on Exxon Mobil to agree and do the FSSMLIS itself than anyone else as required by law.

                      Pending Exxon Mobil meeting Section 47(5) requirement of the law, Exxon Mobil is illegally operating on customary land and its operation is unlawful – period.

                      regards

                    • Hi Stephen and Vailala,

                      We now have big earthquake in Hela and Southern Highlands province now.

                      It is sad how all this will come to end but many believes that it is a man made earth quake.

                      Lot of challenges now for the developer and all stakeholders of the project.

                      regards

                    • Hi Vailala,

                      Your comment relating to Rimbunan Hijau is as below:

                      PAPUA NEW GUINEA
                      [IN THE SUPREME COURT OF JUSTICE]
                      SCA 126 OF 2011
                      BETWEEN:
                      RIMBUNAN HIJAU (PNG) LIMITED
                      Appellant
                      AND:
                      INA ENEI on his behalf and on behalf of Moga clan of Loupom Island, Abau District, Central Province
                      First Respondent
                      AND:
                      PUBLIC CURATOR OF PAPUA NEW GUINEA AS REPRESENTATIVE OF THE ESTATE OF IBI ENEI (Deceased)
                      Second Respondent
                      Waigani: Salika DCJ, Kandakasi & Toliken JJ.

                      30. Kandakasi J., in his decision in the P’Nyang and Kanga Kawira cases correctly calls them “fraudsters and thieves.”[27] As was noted by his honour in his judgments, the PNG LNG project presents a clear case on point. In this project, despite s. 47 of the Oil and Gas Act, both the State and the developers have failed to properly identify the true and correct landowners, properly organising them into ILGs, enable the landowners to fairly and meaningfully enter into negotiations with the developers and the State and for the developers and the State to seek and secure from the true and correct landowners through their duly elected or appointed leaders the landowners free and informed consent and approval and ultimately, their social license to operate. The contracts or agreements and the deals the State and developers enter into with persons not properly identified and appointed by the landowning clans, or groups, remain null and void ab initio or void and of no effect from the very beginning. Given that, when the true and correct owners eventually assert their ownership rights and exercise their rights, challenging the contracts or deals with the fraudsters and or thieves, they must give way. Such contracts do not bind the true and correct landowners. If need be, the State and or the developer concerned need to enter into completely new contracts with the true and correct landowners on terms that are fair and reasonable with reasonable compensation being paid for the earlier illegal entry, occupation and conduct of their businesses.
                      ………………………………………………
                      The above supreme Court ruling refers to Section 47 of the Oil & Gas Act, PNG LNG case before the ADR/Mediation is leading toward the ruling in above case.

                      regards

                • Vailala,

                  Thank you – this is the case of ‘the truth and the honour don’t always win’ scenario. The fact of the matter is the customary landowners, the State and the project developers are not above the relevant laws contained therein the Oil & Gas Act, especially Section 47 (5) which states clearly that the Licensee (Exxon Mobil) shall complete the full Scale Social Mapping and Landowner Identification Studies (FSSMLIS) and submit that together with the application for Petroleum Development License (PDL).

                  Has Exxon done the FSSMLIS? The fact is that it has not. It only did Preliminary Social Mapping and Landowner Identification Studies at the time when the PNG LNG Gas Agreement was signed on 22 May 2008. That is why on the cover of the agreement, Hides 4, Angore and Juha gas fields where under Petroleum Retention License (PRL) when the agreement was signed.

                  In 2009 the UBSA and LBBSA was signed but some landowner took the matter to court, yet PDL was somehow granted and in 2010 under OS No.546 of 2010 the National Court Order ADR/Mediation.

                  Today as I comment, the State and ADR mediation team a preparing for logistic arrangement to continue the ADR mediation program which was suspended in 2015 due to funding problem.

                  Therefore, technically and legally pending the completion of the ADR/mediation Exxon Mobil is operating without legal license as it is, as the license is yet to comply with Section 47(5) requirement of the Oil & Gas Act and if it continues to ignore this truth it is only inviting jungle justice and this is dangerous in a place like the Hela region.

                  regards

                  • Thankyou John for your comments. I do think that your analysis of statutory law is on point and that your conclusion is reasonable. But what needs next to be considered is where may things go from here? I conjecture that if the matter were to come before a court we may assume that the court would simply order that the parties (GoPNG – ExxonMobil) take remedial action to bring themselves within statutory compliance. The court would note that Justice Kandakasi has stepped into the breach and would likely hand down an order that the parties jointly support Justice Kandakasi’s initiative.

                    As to whether an action may be brought against ExxonMobil for trespass and damages the legal implications are too complex, and uncertain, to make them suitable for discussion on a blog-site.

                    ExxonMobil would be well-advised to draw some lessons from this fiasco. Project developers usually like to draw a bright line between engineering and social engineering. On the one side, they say, is petroleum engineering, which we do, and on the other side is social engineering, which we don’t do. I think it fair to say, after reviewing recent court decisions that touch on custom law and customary landownership, that ExxonMobil needs to re-draw this line and recognise that it’s legal obligations to landowners may be a great deal more extensive than it has been prepared to acknowledge to date. Obviously, these obligations may include taking a much more effective role in landowner identification, as well as facilitating landowner organisation for the receipt of project benefits and ensuring that the benefit distribution is satisfactory to the legally entitled recipients.

                    The ‘social licence to operate’ (SLO) is a judicial construct. It may be understood as an abstraction derived from the legislative scheme for customary law and customary land ownership law. It may also be understood as an elaboration of the PIC doctrine, which is old and settled PNG law. The intent and effect of the SLO construct is to recognise and bridge the divide, or chasm, between a statutory law concept of ownership of property by documented proof (e.g. an entry in the land titles register) and the customary law concept of property where land-based rights and entitlements emerge as an outcome of discussion, consensus and agreement, by custom of the parties, without reference to either statute or document.

                    More generally, from a development studies point of view, we should assume that any PNG development project that touches on customary land needs to pursue a policy of ongoing landowner engagement. This engagement must be such that it meets and supports on a continuing basis a landowner-based standard of satisfaction. It is only when this landowner standard is continuously maintained that the developer can then claim that it has a ‘social licence to operate’ on project-affected customary owned land.

                    We should also note that the FPIC doctrine (arising from the Awas Tingni Case, which in turn gave legs to the UNDRIP), that is now of great interest to the mineral resource extraction industries has been embedded within PNG law for many decades.

                    Cheers

                    Vailala

                    • Vailala,
                      Thank you for the very good comments. What is important for the project is that parties of any agreement (PNGLNG Gas Agreement signed on 22 May 2008) must take responsibility for their decision and fix the problem they created.

                      In this instance, the State and Exxon Mobil agrees with letters confirming that no full scale social mapping and landowner identification study was done and their failure to appeal the National Court Decision for the ADR/Mediation confirms that.

                      Exxon Mobil must confirm that it failed to comply with Section 47(5) requirement of the Oil & Gas Act to get the PDL and the Government failed to assess ExxonMobil’s failure to do the right thing from the onset.

                      Therefore, until such time the ADR/mediation is completed, technically Exxon does not have legal license to operate and it is serious.

                      Exxon Mobil has been warned already and I know they are aware of the issue but it is playing a ‘wait and see’ game when it is responsible for all the landowners benefit issues in the PNG LNG areas and it is only a matter of time, when we see a “mobilized community resistance”. We have seen few of it and Bougainville experience is very fresh in peoples mind and it will happen soon, if social license engineering requirement is ignored.

                      Generally, in PNG no project is safe until and unless social engineering is done from the onset.

                      regards

                      john

  • Sam Koim and Stephen Howes can find no solution to how the royalties from the export of gas by the PNG LNG Project can be paid to the “landowners” at Hides. This is because the situation at Hides and in Port Moresby is almost a perfect storm, in which, in addition to those they discuss, a number seemingly unrelated circumstances have come together in a way which may ultimately cause the LNG project and the PNG Government severe difficulties. These include Huli social organisation and land tenure, the fraudulent distribution and massive theft of public money from the benefits agreement grants paid in Port Moresby to individuals representing themselves as Huli leaders in conjunction with allegations of kick-backs to those who approved the payments, the general incompetence of public service staff and their deep reluctance to visit or stay in the Hides area, a deep distrust of the banks by individuals at Hides who allege theft of money from their accounts by bank staff and the unwillingness of banks to open branches in the project area. I will comment on the social organisation and land tenure issue.
    Koim and Howes raise the matter of Social Mapping and Landowner Identification Studies. They are much misunderstood documents. These studies were undertaken by a Huli speaking anthropologist with a great deal of experience with Huli culture and practice and were an extension of studies undertaken for the Kutubu oilfield developments by Oil Search Ltd where they have been used successfully. Primarily, they identify, not individual land owners, because that is not possible, but the landowning groups that are found within a Petroleum Development Licence Area (PDLA) within which the project will occupy land and extract gas. These groups have become known universally as “clans”, which raises problems itself, because within PNG there is much misunderstanding of what a clan is.
    The boundaries of the PDLAs are grid squares of the international Universal Transverse Mercator (UTM) coordinate system and are not congruent within Huli clan territory boundaries. Thus some clans may fall outside an area that is due to receive royalty payments by just a few meters. Huli landowners do not know where the PDLA boundaries fall in relation to their clan boundaries. This creates much anxiety among landowners. Oil Search Ltd community affairs staff mapped clan boundaries around its production gas well and gas-to-electricity facility at Hides in the 1990s. Esso Highlands Ltd did not accept that its field staff should do similar boundary mapping within the LNG area on the grounds that it was the government’s responsibility to do it (which it is).
    The Huli owners of the PDLAs within which the PNG LNG operates organise themselves in a way that many other PNGeans find difficult to grasp because it differs from what they are familiar with. Other PNG highlanders in particular, are commonly confused and even disparaging of, Huli social organisation and land tenure.
    The Huli “clan” is known as a hameigini. The Huli clan territory, that is the land, is also known as a hameigini. The boundaries of Huli clan land are usually clearly identified by deep ditches and are not often disputed. Where the land is disputed, the dispute is usually related to how the people who presently occupy the land are classified, how they classify themselves, or over what sort of rights they have to occupy the land.
    People can claim membership of a clan by direct descent from a male, their father or grandfather and so on. People who can do this are called tene. Tene are the primary clan members. As long as they can demonstrate their descent by citing genealogical evidence that is agreed to as being sound by other tene members, their membership and their occupation of land belonging to their clan cannot be contested. Tene clan members can make their land available to non-tenes to occupy or use, especially relatives from other parts of Hela.
    People may also claim membership of a clan through a female, their mother or grandmother for example, who will be the daughter of a tene clan member. Clan members who do this are known as yamuwine. An individual is yamuwine, even if he traces his descent from a very distant female ancestor. An individual yamuwine clan member who participates fully in clan activities such as fights and exchanges, who contributes generously pigs and food to funerals and compensations, and who proves to be a wise and strategic leader, can become known as “just like a tene”. Nevertheless, should he come into dispute over clan land with a tene clan member, he will remain at a disadvantage, because a tene member has primary rights which will usually not be able to be overridden by a yamuwine member.
    Over a number of generations, whole groups of people who trace their descent from a yamuwine ancestor, come to be known as yamuwine sub-clans or even yamuwine clans. Such groups cannot deal with their land without consulting with the tene clan that they emerged from a number of generations ago. A common cause of a dispute and sometimes vicious fighting is a yamuwine clan or sub-clan declaring itself tene and adopting tene rights over the land it occupies. On the other hand, a tene clan may decide to treat a yamuwine group as “just like tene”.
    A third level of clan membership are known as wali haga. They may be relatives wives or friends. A tene or a long time yamuwine clan member can invite such people to come and reside within the clan land and to grow food there.
    This sort of social organisation has a number of implications: an individual who is tene in one clan can be yamuwine in another. He can legitimately occupy and use land in more than one clan territory. In the past many men had more than one residence. A study of a clan near Tari in the 1950s found 40% of males had at least one additional residence outside the clan land. This had fallen to 20% by 1978. Two major advantages of more than one residence were first, the ability to make gardens in more than one environment and second, to have a place of refuge in the case of a fight gone wrong. Nowadays, an additional advantage is the ability to move to a clan territory within a PDLA that will receive payments from royalties from a clan territory that is outside a PDLA and so will receive nothing.
    The emergence of yamuwine clans has other implications when payments of royalties are considered. The tene landowners will attempt to be the recipients of the payments and will want to redistribute a share to the yamuwine sub-clans. The yamuwine members will resent this and may try to reclassify themselves as tene, often seen by tene members, as a very provocative thing to do.
    A very important implication of this situation is that it is all but impossible for an outsider to determine the clan membership of any particular individual. Even for clan members, membership of some individuals and groups is arguable, and the Huli spend a lot of time debating just such matters. In the circumstance of a large amount of money about to come to one group and not to another, to ask an individual which clan they are a member of is extremely unreliable. Clan and individual histories may be fabricated, clan leaders may not know the history of their occupation of particular land and individuals whose ancestors moved to a clan territory several generations ago may not be able demonstrate their rights to be in occupation, or may make them up. Other than long, drawn out public debates, many of which come to no agreement anyway, membership of Huli landowning groups cannot be determined. In addition, identifying land owners once is just the beginning of the task for outside administrators. Clan members are born and die or are adopted in, every day so to properly keep track of who are clan members will require continual monitoring.
    This situation has been understood by Lands and Community Affairs staff contracted to Esso Highlands Ltd since the beginning of the project but their advice that the government would almost certainly be unable to identify landowners to receive royalty payments was not understood by senior managers.
    If it is not possible to identify individual landowners, how can royalties be paid to landowners? Koim and Howes raise the possibility of using Incorporated Land Groups (ILGs). In addition to the requirements to register an ILG listed by them, an individual can only be registered as a member of one ILG, a restriction that is totally unsuitable to Huli. This is one reason why ILGs were not previously used to register Huli landowners.
    At Hides, landowners repeatedly say they will accept royalty payments made to clan representatives, (“clan agents”) as long as the payments are made in cash and in public, so that everybody can see who receives the money and can know how much they received. They say any other form of payment is open to fraudulent dealings and theft by public servants, clan leaders and politicians. The recent history of payments made in Port Moresby under the Development Grants and the Business Development Grants of the LNG USBA and LSBA suggests they are right to be concerned.
    This approach was used to pay a K243,000 deprivation grant to the landowners of the Komo airfield. The clans owning the land and their agents were identified by EHL community affairs staff as part of an extended mapping exercise before construction of the airfield began. The cash was placed in large envelopes and as the name of the clan was called out, the cash was removed from the envelope and shown to the watching clan members, then placed back in the envelope and given to the agent. By the end of the payment, clans members had formed groups and cash was being distributed to them by the agents. Lands and Community Affairs field staff visited the areas affected in the days after the payment and sought complaints from people who believed they had not received a fair share. The only complaint received was from a man in Port Moresby who demanded he be paid there. His clan agent said he had been away from Komo for many years and had not contributed to the clan’s affairs and so would not receive a share. Such payments are allowed under the O&G Act. This was a much smaller exercise than that which will be required to pay royalties, where many more clans are involved. The biggest problem with the Komo payment was the maintenance of security over a large amount of cash being moved within easy access of heavily armed criminal gangs located elsewhere in Hela, and in Southern Highlands and Western Highlands.

    • hi Bryant,

      Thanks for this extensive comment and analysis. A couple of reactions. Sam Koim and I don’t “raise the possibility” of using ILGs to pay royalties. We note that this mechanism is mandated by the 2009 benefit sharing agreements. More broadly, your analysis touches on many broader issues we were unable to cover in our post. It reminded me of Colin Filer’s excellent seminar on the PNG LNG landowner issues (see https://devpolicy.crawford.anu.edu.au/sites/default/files/events/attachments/2016-09/smli_seminar_sept_2016.pdf). As you know, Colin distinguished between three approaches: pragmatic, idealistic and individualistic. You are advocating a pragmatic approach (cash payments to clan representatives). PNG has taken the idealistic approach (payment to ILGs). But that now has an individualistic element to it since ILGs require listing of individual members to be constituted, and, as you say, each individual can only belong to one ILG. Put in these terms, your argument is that the indvidualistic, idealistic approach cannot work in the context of the PNG LNG project. I am not expert enough to judge one way or another. Clearly, these issues should have been resolved, as the law requires, prior to the commencement of construction. How they will be resolved now is very hard to see indeed.

      Regards,

      Stephen

      • Stephen,
        I was away for Colin’s seminar. It was be a joint effort but I was in PNG so we just talked about options before I left. I am not arguing for only one answer. Like you, I don’t have one. I think the Huli landowners have to come up with one but it has be sorted out at Hides, not in POM or anywhere else. – B

        • Bryant,

          Today, in law no body is a landowners at Hides, Juha, Angore and Hides 4 as no ILG has been formed since Oil Search days. Exxon Mobil is operating illegally on customary land as landowners for purposes of the ILG Act and the Oil & Gas Act, the state and Exxon Mobil are to enforce the law and if they cannot the project is operating on Black mail and assumed social license and in such a situation a mobilised community/landowners resistant and shutting down the project is inevitable.

          God help my country – PNG.

  • Excellent, as far as it goes (the full version of criminal misbehaviour, fraud, violence, deceit etc etc in the PNG resources sector would be longer than the Encyclopedia Britannica). However your reference to the judicial Alternative Dispute Resolution scam drew my attention. This is a very clear example of the judicial corruption evident in Papua New Guinea, and warrants investigation. There are a number of variations on the theme, and more than one judge is involved.

    • Very interesting to read some really good comments. I agree with Bryant Allen and his analysis of the land tenure system. Definitely ILG System will not work for Huli’s.

      The simple fact is that all the Huli’s are related to each other. It will be mind boggling to recall the names of your ancestors back to 18 generations by heart. Only Huli’s can do that. The issue of benefits and clan vetting is only with the Huli’s and not other ethnic groups (Kutubu, Gobe & Pipeline).

      Any efforts initiated by the government will be like a scam and will never solve the problem. Previous attempts were a waste.

      In Huli, everyone is a leader and may want to express his/her opinion in a meeting. Even if the person has a solution or not, he/she wants will say something to maintain the status of the family and clan lineage.

      What the PNG Government fails to do is to facilitate and allow themselves to talk for as long as they want. Huli’s understand themselves better than anybody else from outside. If we allow them to talk, they will sort themselves out.

      We need some Huli’s to provide real leadership on the ground and allow representatives and leaders from each License area to talk and they will eventually reach a solution.

      Government Officers and Consultants become impatient with time and rush things. Good resolutions will be reached when Huli’s are given enough time to talk among themselves even if it takes them 1 month of just talking.

      Michael

      • Dear Michael,

        It is true but the law is law. unfortunately DPE and Lands department do not collaborate well enough to enforce the relevant laws.

        The ILG system is the best for a society like PNG – No Huli or any other Papua New Guinean can come up with better approach that will towed customary landowners to following one standard approach – ILG. It is just that it has never been enforced appropriately.

        I say this because all customary land in PNG is communal and unless a better mechanism is developed, the ILG system is the best so far for PNG.

        All it needs is better understanding of the culture and fitting that with the ILG system and agencies like DPE and lands department must enforce the relevant laws.

        The Huli’s have customary law and they know how to follow so following modern law in the form of Oil & Gas is not difficult, if outsiders including companies want to do business which has the potential to changes many things including losing the land that they have lived on since time immemorial.

        Put yourself in their shoes and see what it will be like to just to give away land to a strangers for business without knowing the future. The same is the case – people talk and they must know what the future holds as a result of the business deal as they do not live on trees but on land. Thus the land issue is very sensitive.

        However, the problem with companies is that they want quick answers and this is the case with the PNG-LNG Project.

        Retrospectively, Oil & Search did not do a good job and so it came up with the Agent system for its own benefit and not for the landowners – they have deprived the landowners big time as there was no development in Hides in their time. Todays Hides issues are caused by the history of the early days.

        As to the PNGLNG project, the Project co-ventures pushed through the agreements without considering the law.

        Two major laws have been breached.

        1 – Royalty payment:

        Section 168 is very clear. Royalties are to be paid to project area landowners , affected LLGs, and affected Provincial governments by the companies. [Note -m This refers to PDL areas]

        The question is, whilst upstream landowners are waiting to complete the SMLI studies and the licensee is yet to comply with Section 47(5) of Oil& Gas Act requirement, which law permits MRDC to pay royalties to pipe line and facilities landowners. This is a major issue.

        2- SMLI studies – section 47(5):

        The law is very clear on every aspect of dealing with customary landowners. For instance , Section 47 (5) confirms that the licensee must do the Full-Scale Social Mapping and Landowner Identification (FSSMLI) and with the FSSMLI the licensee must apply for Petroleum Development License (PDL).

        It does not say licensee must be given the PDL before FSSMLI is done. What is happening at Hides, Angore and Juha is in breach of the law. The Licensee is not doing the FSSMLI studies and due to the Licensee’s failure to comply with Section 47(5) requirement, landowners are denied benefit.

        Right now the Licensee does not have legal license but operating on assumed social license which is very dangerous.

        Remember Huli people did not form the law, yet they are waiting to comply with the law, so who is not following the law here?

        This is bad precedent set and the people of US (Exxon Mobil), Australia (Santos), Japan (???), the companies from their country is causing all this problem in our country.

        It is abuse of human rights and shareholders of Exxon Mobil, Santos and others must be told of this if they are not aware.

        The remark by Sam in that DPE and ADR/mediation are interested in their role whilst Exxon Mobil is operating 24 hours depleting the non-renewable resources – Gas and Oil Resources without legal license.

        By the time Exxon Mobil is gone DPE and ADR team will still be arguing over who is going to do the SMLI studies and funding continues to be an issues..With this scenario in a place like Hela region where men die or live a hero protecting their land, pig and women, jungle justice is inevitable and the signs are already written on the wall.

        All is not right at Hides….!

        JY

        • Thanks, John,

          As far as I understand, SMLIS has been completed by the project developer and vetted by DPE and accepted it. The issue here is the dynamics of Huli Land Tenure System. Any Huli person can claim land ownership from both the mother and father’s side for more than 10 generations.

          In other patrilineal societies in PNG, the cousins or those children from the sister’s side will respect the rights of those children (cousins) from their uncle to make decisions over the land. They will accept whatever benefits that are decided by the uncle and his children. This is not the case in Huli. They claim somewhat equal rights to the land and the benefits. This is where SMLIS is said to be incomplete.

          Any person from Koroba, Tari Pori, Tigibi, Magarima, Benaria and Homa Paua can claim somewhat equal rights over land in Angore, Hides 1, Hides 4, Nogoli where they traced their route of migration and family genealogy back to the project area. Having said that, the issue here is about accommodating the landowners outside of the PDL Area into the benefit sharing. It does not matter whether they physically live within the PDL or not. The main concern is that they must be included in the benefit-sharing structure.

          For this to happen, it would not be appropriate for the government to make a decision as to who will be included and who will not. This is something which I believe will be best sorted out internally by the impacted clans living in the PDL Area. Whether through ILG or any other benefit sharing mechanisms, the distant clansmen and family members must be included. This is the very problem that we are talking about.

          Another issue here is the amended ILG Act 2009, which requires one person to become a member of only one ILG. Huli system does not fit in the amended ILG Act. Hence, I mentioned that ILG will not work in Huli. However, ILG is not the only mode of benefit distribution and I opt for another mechanism that will work for inclusiveness. I know one option that will work but will not mention it here. It is up to some super consultants to think about it.

          • Michal,

            Thank you for the discussion.

            1.Exxon Mobil did not comply with Oil & Gas Act Section 47 (5). This law does not belong to the Huli’s.
            2. Exxon and Government (state) sign PNGLNG Gas Agreement on 22 May 2008. In Section E(15) State and Exxon Agreed that Section 47(5) was complied with.
            3. The agreement between State and Exxon was challenged in Court and National Court OS 546 of 2010 ruled in favour of Landowners and automatically nullifying Section E(15) of PNGLNG Gas Agreement.
            4. Today as we discuss, Section 47(5) of the Act is yet to be complied with by Exxon Mobil.
            5. Mind you, granting the PDL is subject to meeting Section 47 (5) requirement or Complying with Section 47(5) is the pre-requisite for granting the PDL. If Exxon Mobil is yet to meet Section 47(5) requirement it means Exxon Mobil does not have legal license to operate. period.
            6. Lastly, the law as it is for application in this matter is the Oil & Gas Act and the ILG Act. The people are not refusing to work within the legal requirement. It is the companies and government that do not want to comply with the law.
            7. I have been through this process and have mine declared by Justice Kandakasi. If I can do that in 30 minutes and down loaded that on my own website, it can be done.

            To this end, your suggestion of a super consultant is important but I can provide such support and advice as I am a specialised Project Social Engineer.

            Have a great day and thank you.

    • Agree Mark,

      The systems have failed and the courts and the regulators have taken over the role of Exxon Mobil as per Section 47 of Oil & Gas Act and it seems that truth and honour don’t always win.

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