The question of how to regulate the distribution of project benefits, and the question of how local landowners should be organised and represented in the process of distribution, became a major issue for the local petroleum industry in 1997. There were several reasons for this. Firstly, the Chan government had changed the rules of this game in 1995 and 1996, by proposing to grant local landowners 100 per cent of the royalties which the State would henceforth collect from the developers of new projects in both the mining and petroleum sectors, together with a ‘free’ two per cent share of project equity whose cost would be shared by the other joint venture partners in proportion to their own stakes in the project. At the same time, the 1995 Organic Law on Provincial Governments and Local-Level Governments created an entirely new set of financial relationships between the three tiers of the State, but took not the slightest account of the relationships already embodied in the development agreements for mining and petroleum projects. And to make matters even more confusing, the new Organic Law required all resource developers to pay a new kind of tax, to be known as ‘development levies’, to the provincial and local-level governments hosting their operations, but did not specify the manner in which this liability was to be calculated (Filer and Imbun 2004).
These innovations caused more concern in the petroleum sector than in the mining sector, because the agreements covering development of the Lihir gold mine had already been concluded, and there were no other major mining projects whose development conditions were still subject to active negotiation. In the petroleum sector, by contrast, the stakeholders were still negotiating the division of the spoils from the Gobe project, whose flow of oil was in the process of being added to that of the Kutubu project. The Draft Memorandum of Agreement between the State and Gobe Project Area Landowners, produced in January 1997, was a model of the muddle which now afflicted the social relations of resource compensation in this sector. And to make matters worse, three years of legal disputation had still failed to determine who actually counted as a Gobe Project Area Landowner in the first place.
Under the draft Gobe agreement, landowner benefits were to be distributed between local ‘clans’ in proportion to the amount of land which they owned within the boundaries of the Petroleum Development Licence (PDL), and then subdivided between a number of ILGs in each ‘clan’ in proportion to the number of members which they contained (Taylor and Whimp 1997: 81). This principle of distribution was at variance with the one adopted in the Kutubu project agreements, where the benefits were distributed equally between all the land groups which owned any amount of land within the boundaries of the PDL, or any section of the route taken by the export pipeline.[12] But by 1997, the Kutubu principle had already given rise to a predictable problem: the original land groups were splitting into smaller land groups, and some ‘spurious’ land groups were being manufactured in the process.[13] Hence the call for CNGL to invest more time and money in the art of ‘land group maintenance’ (see Weiner 1998, this volume; Goldman, this volume).
The final, and perhaps the most important, reason for rethinking and reconstructing the social relations of compensation in the petroleum industry was the existence of two proposals to develop the reserves of natural gas which had been found in association with the oil now flowing down the export pipeline. Both proposals would entail a very substantial amount of fresh capital investment, and both would yield a new ‘benefit stream’ of unprecedented size (CIE/NCDS 1997; Simpson et al. 1998). The addition of a gas industry to the existing oil industry demanded a new policy framework and a major overhaul of the 1977 Petroleum Act. If nothing were done to regulate the flow of benefits, the benefits might never flow at all, because one or both projects might drown in ‘political risk’.
The ‘interrelationships, roles, responsibilities and authorities of sectoral participants in relation to issues affecting the involvement of landowners in petroleum projects’ were scrutinised in some detail by a pair of lawyers engaged under a Technical Assistance grant from the Asian Development Bank (Taylor and Whimp 1997). Their recommendations were subject to discussion by a number of ‘sectoral participants’ at a two-day seminar held in January 1998. The main target of their recommendations was the State’s manner of dealing with landowners, though it was recognised that any major change to one side of the triangular relationship would necessarily have some impact on the other two. The State’s position, or the State’s quandary, was rather nicely expressed in the title of the seminar presentation by an official of the Department of National Planning and Implementation: ‘Packaging MOA [Memorandum of Agreement] Projects as a Subsidiary or Small Public Investment Programme: A View to Impose and Instill Discipline and Development Consciousness in the Utilisation of Benefits Derived from Natural Resources for Equitable Distribution as Benefits to Landowners’ (Lovuru 1998).
The outcome of this seminar was the establishment of an Action Team whose membership was drawn from those private companies and government agencies which had some stake in reformulating the ‘benefit regime’ in the petroleum sector. The main body of the Action Team held at least 15 meetings between March and June 1998, at which its members talked at length about the problem of establishing principles that would serve to rationalise the distribution of part of the national government’s share of petroleum revenues between provincial governments, local-level governments, and local landowners in each project impact area. The fruit of these reflections was a set of drafting instructions for something to be called the Petroleum (Project Benefits) Act. Some members of the Action Team joined a smaller talking shop, which came to be known as the ‘ILG Breakout Group’, and which reflected on the riddles posed by the State’s lack of capacity to make effective use of the LGIA as a vehicle for landowner organisation and benefit distribution. The conclusions of this smaller body were discussed at another two-day seminar held in September 1998.
Following one of the recommendations previously made by Taylor and Whimp (1997: 109), the Action Team suggested that the design of better models for distributing landowner benefits within a landowning ‘community’ should henceforth be based on ‘social mapping studies’ funded by developers as a condition of their prospecting licences. In my own capacity as a member of the Action Team, I drafted a document on this subject which proposed that:
one of the aims of a ‘preliminary’ social mapping study would be to ‘establish the basic principles of customary resource ownership and group formation in the licence area, with specific reference to the feasibility of incorporating local land groups under the Land Groups Incorporation Act’ (Filer 1998b: 1); and
one of the aims of a ‘full-scale’ social mapping study would be to ‘recommend the principles and procedures to be adopted in the process of incorporating local land groups’, or else present an argument against land group incorporation, and ‘recommend the most appropriate, and least contentious, alternative forms of representation or methods of distribution, which would be consistent with both: (a) local custom and practice; and (b) the principles established by government policy and national legislation’ (ibid: 3).
Despite his unrepentant enthusiasm for the practice of land group incorporation, Tony Power was unable to persuade all other members of the Action Team that this practice should now be granted the force of legal necessity. Within the industry itself, there was a split between CNGL, in its capacity as operator of the Kutubu and Gobe projects, and British Petroleum (BP), in its capacity as operator of the Hides gas project, which had been developed as a source of power for the Porgera gold mine. The BP line was spelt out by one of the company’s consultants, George Clapp, who argued that the Huli landowners of the Hides project were recalcitrant traditionalists who preferred to see their leaders divide up large amounts of cash by means of public ceremony, rather than be forced to reflect in private on
the sad fact that in a PNG context where one has cheques put into accounts and signatories to those accounts, there will be fraud. By far the best method to ensure that some compensation monies trickle down to the grass roots level is to pay in cash and use the agent system. In that way the money is there for immediate division according to custom, the people know when it is going to be paid out and, although the leaders as agents may be entitled to keep some back, at least the larger proportion is divided out according to custom (Clapp 1998: 6).
In this respect, the Hides project simply followed the example set at Porgera, where the Ipili ‘clan agents’ were also accustomed to dealing with public scrutiny of periodic flows of cash. The Huli people were also seen to resemble the Ipili people in possessing a form of social organisation in which individuals could and did claim membership of more than one ‘clan’ (Burton 1991; Allen 1995; Golub, this volume), thus confounding the principle of mutual exclusion which had informed the original process of land group incorporation in the Kutubu project impact area.
Tony Power and other members of the ILG Breakout Group thought that the problem of multiple membership could be solved by means of a legal distinction between the ‘controllers’ and the ‘beneficiaries’ of each land group, so that individuals could have ‘interests’ in more than one land group without being members of more than one ‘controlling group’. They also proposed a number of other amendments to the LGIA that were meant to discourage the registration of ‘spurious groups’, limit the opportunities for misappropriation of group funds, enable each group to lease parts of its estate to individual members or outsiders for business purposes, and strengthen the mechanism for resolving disputes within and between groups. But even if the Lands Department could be persuaded to persuade its minister to push this raft of amendments through Parliament, a very large question mark would still be left hanging over the State’s capacity to supervise, support or ‘maintain’ an ever-expanding number of land groups.
In the event, no Petroleum (Project Benefits) Bill was ever presented to Parliament. Instead, some of the recommendations of the Action Team found their way into the Oil and Gas Act that was approved by Parliament in November 1998, while others were treated as matters of policy or regulation, and some were simply laid aside (Filer and Imbun 2004). This is not the place for a detailed discussion of what the new law had to say about the determination and distribution of landowner benefits, the conduct of social mapping studies, or their relationship to the ‘landowner identification studies’ that are also now required as preconditions for the issue of development licences in the petroleum sector. Suffice to say that the law follows the recommendations of the Action Team to the extent of saying that monetary benefits allocated by the State to project area landowners will normally be paid to ILGs ‘unless otherwise agreed between the State and the grantees of the benefit or prescribed by law’. Under Section 169, social mapping and landowner identification studies are two of the bodies of evidence which are expected to guide the Minister in deciding which land groups, or which other ‘persons or entities’, are to receive these benefits on behalf of the landowners. Section 176 follows another recommendation of the Action Team by saying that these landowner benefits shall be divided between ‘incorporated land groups or other representatives … in proportion to the number of project area landowners each represents’. In this respect, the law exhibits a preference for what I have called the ‘Gobe model’ rather than the ‘Kutubu model’, because it says that benefits should be distributed between land groups in proportion to the size of their membership, rather than the area of land which each group holds within a licence area.
But the irony of this preference is revealed in the addition of a new section (169A) in the Oil and Gas (Amendment) Act of 2001, which expressly relates to the distribution of benefits from ‘existing petroleum projects’ as well as from new ones. As in the original Section 169, there is a recognition that the identity of the landowners or their representatives may still be undecided or disputed, in which case the Minister is entitled to ‘make a determination’ in light of
… any agreements by persons who are or claim to be project area landowners, the decisions of courts of Papua New Guinea as to ownership of land or rights in relation to land in the vicinity of the petroleum project in question, the results of social mapping and landowner identification studies carried out in accordance with this Act, and submissions from affected Local-level Governments or affected Provincial Governments of the petroleum project in question or from any other person claiming an interest or to be affected by the decision of the Minister.
This long list of different kinds of evidence is itself evidence of the ongoing problems created by the policy and practice of land group incorporation in the oil and gas sector. And anyone reading the national newspapers in PNG will know that these problems remain especially acute in the relationship between the State and the people who claim to represent the Gobe project land groups.[14]