PNG government takes full ownership of Ok Tedi mine

Sept 19 (Reuters) - Papua New Guinea's government has taken100 percent ownership of the controversial Ok Tedi gold andcopper mine after a lingering dispute with a development fundwith controlled the majority stake on behalf of people in thearea.

PNG's parliament this week pushed through laws for thegovernment to take full ownership of the giant mine, and also toremove a 12-year old immunity deal for the mine's former owner,BHP Billiton Ltd, for environmental damage in thecountry's Western Province.

"The government in 2001 made a very bad decision in grantingimmunity to a corporate giant, preventing its own people fromexercising their right under law to sue for permanent damagesdone to their environment and their livelihood," Prime MinisterPeter O'Neill told parliament.

The move means profits from the Ok Tedi mine will now beavailable to the national government to spend, rather thancurrent arrangements where the proceeds were divided between theWestern Province and the national government in Port Moresby.

The decision has also sparked a major row between O'Neilland former prime minister Mekere Morauta, who is chairman of theSustainable Development Program that controlled the majoritystake in the mine.

The big Ok Tedi mine, in a mountainous region in PNG's west,has been operating since the 1980s but has been blamed forsubstantial environmental damage along the Fly River because itdumped its mine tailings into the river systems.

In return for legal immunity, former owners BHP Billiton in2001 divested its controlling share in the mine to theSustainable Development Program charitable trust, which held 63percent of the mine. The PNG government controlled the remainingshare.

The changes mean BHP could face claims from landowners overlong-term environmental damage, although previous PNGgovernments approved the dumping of tailings into the rivers.

BHP, which is no longer active in the resource-rich SouthPacific nation, declined to comment on the move.

The mine is expected to keep operating for another 10 years,although its life could be extended.

Morauta has criticised the government actions, accusing thegovernment of theft, and signalling a likely court challenge.

"This is very important legislation. For the first timeexpropriating assets without payment from the people of PapuaNew Guinea, not from foreigners," he told reporters.

The sustainable Development Program also controls a $1.4billion fund, based in Singapore, which is used to promotedevelopment in the Western Province.