Papua New Guinea's Parliament has passed legislation that enables the state to take over 100% of the Ok Tedi copper and gold mine.
The legislation means the cancellation of the PNG Sustainable Development Programme's 63% share in the lucrative Western Province mine.
The Programme, or SDP, is responsible for overseeing aid and income-generating programmes across PNG but with a special focus on Western Province.
It was set up by BHP Billiton when it divested its majority share in the mine in 2001 in return for legal immunity over environmental damage created by the mine.
Johnny Blades reports:
The government take-over of Ok Tedi has been looming for some time. The state already owned 37% of the mine, which for many years has been the government's biggest single revenue source. But the take-over was clearly flagged over recent months by Prime Minister Peter O'Neill's warnings that his government may not extend the life of the mine unless BHP agreed to changes in the terms of ownership. But the current chairman of the PNGSDP, the former prime minister Sir Mekere Morauta, has accused the state of stealing from the people of Western Province. He told EM TV that it's unconstitutional to take over an asset worth around $US700 million to Western Province and a $US1.2 billion long-term fund from Ok Tedi dividends designated for the people of Western Province.
MEKERE MORAUTA: This is a very important legislation, for the first time expropriating assets without payment from the people of Papua New Guinea, not from foreigners, this is from citizens. And that expropriation should be discussed publicly, not just by the prime minister on his own.
But Peter O'Neill rejects Sir Mekere's claims, saying the government is merely taking over ownership of shares which belong to the state in the first place. Mr O'Neill says the SDP has not been investing its funds to meet the needs of the impoverished people of Western Province.
PETER O'NEILL: So that is why we are saying that PNG Sustainable should be now stopped, reassessed into how they've been managing these funds, so that the people of Western Province will say, 'Okay, today we need a hospital. You build a hospital using those funds. Tomorrow we need a school here. We need a road from here to here'. This is their money.
However, in a recent report, the SDP said that in 10 years it had delivered 662 projects across PNG, worth around $US400 million, mainly in education and health. Peter O'Neill had long complained that SDP was effectively controlled by BHP. But Paul Barker of the Institute of National Affairs says BHP only had a minority of SDP's board members.
PAUL BARKER: PNG institutions appoint the majority of the members on the board, but the proceeds from the whole exercise, there's no benefit to BHP, other than the fact that set in law is the arrangement under which PNGSDP does exist.
Meanwhile, the new legislation also repeals the indemnity given to BHP making it liable for environmental devastation caused by the mine. Mr O'Neill said there was no good reason for the former government led by Sir Mekere Morauta to have made BHP immune from responsibility over the destruction it had caused in the Fly River.