John Leahy, Principal, Leahy PNG Law: Viewpoint

John Leahy, Principal, Leahy PNG Law

Viewpoint: John Leahy

Parliament passed the Mining Amendment Bill 2020 and the Oil and Gas Amendment Bill 2020 on July 10, 2020. These bills will significantly change the mineral, and oil and gas sectors, and will take effect following their certification by the speaker of Parliament. The mining bill intends to give the state an avenue to directly participate in mineral exploration and mining through processes of land reservation. The oil and gas bill aims to give the minister of petroleum and energy greater power in granting petroleum development licences (PDL). Three key changes under the mining bill concern land reservation, where preference will now be given to state applicants; an amendment to arbitration regulation; and a new reporting obligation. Changes under the oil and gas bill, meanwhile, include a provision for minimum expected returns for the state, and strengthen the position of refusal by the minister.

Under the mining bill, the state or a majority stateowned entity can now apply for tenements over reserved land. The state applicant will be given preference over all other applicants, including flexibility in development forum and related project consultation requirements. Tenements that are expired, cancelled or relinquished under the Mining Act will qualify as reserved land. The land reservation, however, does not affect pre-existing tenements. In regards to arbitration, any disputes in connection with the process of land reservation under the bill is subject only to PNG laws.

Mines currently operating are now required to provide live data on production, extraction and sales to a repository that will be maintained by the Mineral Resources Authority. Mines must also submit all mineral and geological data to the Mineral Resources Authority. These obligations are in addition to existing reporting requirements under the Mining Act. The scope of these obligations remains uncertain, and it seems further directives or by-laws would need to be in place outlining the exact requirements, particularly when these obligations seem to raise confidentiality and logistical concerns. Failure to comply with the obligations could lead to criminal prosecution.

There are also a number of key changes to be implemented under the new oil and gas amendment. Where the minister of petroleum and energy considers a proposed PDL to be of national significance, he may impose a minimum expected level of return for the state on the applicant. Almost all petroleum productions in Papua New Guinea are of national significance, but the bill does not specify how the minister – through the advice of the mining advisory board – would calculate the level of return. The bill only states that an appropriate methodology would be adopted, presumably from information furnished by the applicant through the state exercising its disclosure powers. Existing PDL applicants may be subject to these amendments if the minister has not yet granted their PDL. This change creates uncertainty on the fiscal arrangements of a project.

A refusal by the minister is now final, and there are no avenues for consultation following a refusal. The procedural fairness concerning refusal existing under the principal legislation is now repealed by the bill. It remains to be seen whether this attempt to oust the jurisdiction of the courts will be upheld by the National Court, and there may be avenues for judicial review notwithstanding the intent as expressed in the bill. Further, the bill does not contemplate arbitration concerning the refusal, and it appears it is the intent of the bill that any existing arbitration arrangement between the state and developer does not apply to this refusal by the minister. Existing PDL applicants may be subject to these amendments if the minister has not yet granted their PDL. Parliamentary standing orders were suspended, purportedly enabling the Mining Amendment Bill and the Oil and Gas Amendment Bill to be passed without proceeding through the conventional three reading stages. However, it is unlikely that this irregularity would mean that the legislation is invalid on this basis, as the proceedings of Parliament are generally non-justiciable.

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The Report: Papua New Guinea 2020

Legal Framework chapter from The Report: Papua New Guinea 2020

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