The Marape government’s proposed introduction of a new Organic Law for mining, and oil and gas projects will do away with Papua New Guinea’s ‘robust’ legal regime, according to Vaughan Mills, Head of PNG Practice for Corrs Chambers Westgarth. He said it would make it hard to get resources projects approved.

Kainantu Mine operations Source: K92

The introduction of the Organic Law on Papua New Guinea’s Ownership and Development of Hydrocarbons and Minerals and the Commercialisation of State Businesses 2020 has been flagged by Kerenga Kua, Papua New Guinea’s Minister for Petroleum and Energy.

Lawyer Vaughan Mills, speaking at a recent industry webinar, said the proposed Organic Law would replace previous legal practices and conventions in the resources sector.

Organic laws in PNG have quasi-constitutional status, making them superior to Acts of Parliament.

‘They can’t do things that the Constitution doesn’t allow them to do,’ he said, noting that an Organic Law requires extra sittings, longer time periods and high majorities to be passed in Parliament – as opposed to ‘an ordinary act of parliament which would ordinarily be passed by just a majority in parliament without any special notices or time to consider.’

Mills said that the Constitution stipulates that:

• The state owns all resources in their natural state in PNG
• Nothing in the Constitution or Organic Law may allow the parliament to divest itself of legislative power
• The state may not compulsorily acquire property without paying compensation

Ceding power

One of features of the proposed Organic Law, according to Mills, ‘is to confer all regulatory power in relation to state’s interests in minerals into either the Mineral Resources Authority (MRA) or a proposed new National Petroleum Authority (NPA).’

He said if ‘regulatory power is ceded irrevocably by the state to those entities,’ this may raise questions about whether Parliament would have gone too far in divesting legislative power.

‘There is a question about whether the Organic Law goes beyond, makes a provision for, the state’s interest in minerals [if it completely gives] that power away to other entities.’

‘There may be an issue with regulatory power, which is essentially a legislative power, being shifted entirely to the MRA or the NPA. There is a question about whether the Organic Law goes beyond, makes a provision for, the state’s interest in minerals [if it completely gives] that power away to other entities.’

Mills said the proposed Organic Law has ‘opening words around the compulsory acquisition of property if it is for a public purpose and just compensation’. But he expressed concern about the lack of detail, saying it raises questions about whether there is adequate provision for landowner rights.

‘It is particularly relevant to landowners and surface rights because the Organic Law draft doesn’t deal at all with surface rights and that is to be compared in the current law in the Oil and Gas Act and the Mining Act and the Environment Act in relation to hydropower projects – or indeed the Land Act.

‘All of those laws have quite detailed provisions around the process of compulsory acquisition and the compensation that needs to be paid. They are well known and well tested provisions that have stood the test of time.

‘What we seem to have in the Organic Law is a shift away from all of that, [with] regulation being shifted onto a decision making body such as the MRA or the NPA.’

New rules

Vaughan Mills. Credit: Corrs

Mills said that the Organic Law would bring uncertainty to the resources sector for ‘five, 10 or 20 years’ because it would mean there is no longer a ‘tested road’ to achieving an outcome.

‘These projects are very complex technically, commercially and legally. What PNG has at the moment is a well developed, well considered, robust regime for the development of resources projects – whether it is oil and gas, mining, hydropower or forests. It deals with all of those really important things that the Constitution requires it to deal with, around how taxes are imposed, how we deal with acquisition of property, how we deal with people who are affected by the projects.’

‘If the rules are all to be changed, or there is not clarity with the rules, then I just think it makes it extremely difficult to build a robust legal structure around a project.’

He pointed to many unanswered questions in the proposed Organic Law:

‘How broad is this conferral of power on these regulatory bodies? Does it include, for example, power in relation to environmental permitting? Does it include power in relation to taxation? Does it include granting of surface rights and therefore compulsorily acquiring rights from landowners?

‘I think they are all open questions and there is no detail about any of those matters in the draft. If the rules are all to be changed, or there is not clarity with the rules, then I just think it makes it extremely difficult to build a robust legal structure around a project.’