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National Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]
O.S. NO. 532 of 2000
SOSO TUMU FOR LUHALIPU CLAN, SONI KANU FOR MUTI CLAN, NASON BARIPI FOR ISAWERI MAKOF CLAN, NIXON AIENI FOR MAKENA CLAN, DANNY KAPAU
FOR MUSONENER CLAN, PAUL TIMA FOR WAFI CLAN, URUPA KEMESI FOR YESIKI CLAN
First Plaintiffs
AND
JIMMY KINOBU FOR IMAWE KEWA CLAN
AND
INDEPENDENT STATE OF PAPUA NEW GUINEA
First Defendant
AND
MINISTER FOR PETROLEUM & ENERGY
Second Defendant
AND:
LESLIE OPE, EDWARD KAE, MEMBERS OF THE IMAWE BOGASI CLAN
AND:
TIMOTHY LOMA, TARU WATUMA OF SUMBULU CLAN
AND
PETROLEUM RESOURCES GOBE LIMITED
WAIGANI: KANDAKASI, J.
2001: 7th December
2002: 28th February
CONTRACTS – Validity of – Not all persons having interest in the subject matter signing the agreement – Until declare null and void it is still a legally binding contract.
STATUTORY INTERPRETATION – Gas and Oil Act of 1998 – Principles of statutory interpretation considered – Where two meanings are open, it is proper to adopt one that will avoid irrational or unjust consequences – A construction which interferes with existing legal rights to a lesser extent and produces lesser hardships is to be preferred.
Intend of Parliament must be upheld regardless of what principles of interpretation are being used – Intend of Parliament here was to allow for land owners to agree on both entitlement and distribution of equity and royalty benefits from any petroleum project after the coming into force of the Act – ailing any such agreement the Minister for Petroleum is given a discretion to make the necessary determinations having regard to the matters set out in the Act.
Powers of the Minster for Petroleum under ss.169 and 170 of the Act – Whether, the powers of the Minister under ss.169 and 170 of the Act subject to determinations of land ownership by the Land Titles Commission? – Powers of the Minister are subject to the determinations of the Land Titles Commission or a Local Land Court if any in the area.
Whether equity and royalty grants under ss.167 and 168 of the Act are interests in land or grants from the State? – Equity and royalty benefits are grants from the State but to project area landowners – If these benefits are grants from the State, whether land ownership disputes should prevent distribution of such grants? – Any landownership dispute has the effect of preventing any distribution of such grants until the dispute is resolved either by agreement of the parties or the proper authority – Oil and Gas Act 1998, ss.167 – 179 – Land Titles Commission Act ss.15A, 15(1) – Land Disputes Settlement Act s.66 – Land Act 1996 s.12.
WORDS & PHRASES – "Commencement date" means date of coming into operation of the Act – "notwithstanding" can only have meaning within the context of section 169 and that provision applies only the in respect of identification of beneficiaries regardless of what other provisions may say – "Landowners" owners of land on which a petroleum project is developed or is to be developed or people having interest in such land – Royalty and equity benefits are to go to such landowners or people' having an interest in the project land or will be adversely affected by the project – "By other means" in section 169(7) means person other than the minister for Petroleum and Energy – But they mean authorities such as the Land Titles Commission or a Local Land Court or agreement of the parties – "Project area landowners" means persons who have customary ownership or registered title to any part of the land taken up by a petroleum development license and any land with a buffer zone of such a project – "Grant" means a gift, present, a gratuity or an endowment.
By Agreement of all the parties, the following issues were presented to the Court for determination:
(1) Whether the provisions of sections 167(8) and 168(6) of the Act applies to prevent the Minister for Petroleum from exercising his powers in:-
- (i) determining Landowner Identifications by appropriate instrument under Section 169 of the Act, and
- (ii) determining distribution of benefits under Section 170 of the Act, for purposes of the Gobe Petroleum Project?
(2) Whether the determinations by the Minister under sections 169 and 170 of the Act is subject to a determination by the LTC under section 15 of the "LTCA"?
(3) Whether the paintiffs and the other disputing parties who come from villagers located within the locality of the Gobe Project and are claiming interest in land affected by the Gobe Project are deemed to be "project area landowners" within the meaning of the Act?
(4) Whether the Minister is bound by the findings of the LTC on the question of who are the persons to receive the benefits granted by sections 167 and 168 of the Act?
(5) Whether the Equity and Royalty Benefits referred to in sections 167 and 168 of the Act are State Grants and not interests in any customary land affected by the Gobe Project?
(6) If the Equity and Royalty benefits are State Grants, should the disputes on land ownership prevent the distribution of those grants to the project area landowners?
This followed numerous on going disputes over land ownerships and entitlement to equity and royalty benefits out of the Gobe Oil & Gas Project. They did so after agreeing to submit to a mediated settlement and through that an agreement that there should be a one off payment out of the equity funds held in Trust by the MRDC in a 70 and 30% proportion between the Southern Highlands and Gulf Province landowners. They also agreed that a determination of landownership issues by the LTC should be deferred to a later time.
Held:
Statutory Interpretation
Generally:
Papua New Guinea Cases cited:
Custodian of Expropriated Property and Phoebe Kroening v. Commissioner of Native Affairs (Re Mortlock Islands) [1971-72] PNGLR 621.
Keboki Business Group Inc. v. The State & Morobe Provincial Government [1984] PNGLR 281.
Other Cases cited:
Hadkinson v. Hadkinson (1952) 2 ALL ER 567 at 569.
Yap v. Tan [1987] PNGLR 227.
Inakambi Singorom v. Klaut [1985] PNGLR 238, per Kidu CJ at 241.
Public Transport Commission of New South Wales v. J Murray-More (NSW) Pty Ltd [1975] HCA 28; (1975) 6 ALR 271 at 282
FACT v. Smorgon [1979] HCA 67; (1977) 16 ALR 721, Stephen J at 729.
Counsel:
Mr. D. Hauka for the First Plaintiffs
Mr. S. Soi for the Second Plaintiffs
Mr. J. Kawi for the First and Second Defendants
Mr. B. Andrews for the Third Defendant
Mr. B. Lomai for the Fourth Defendants
Mr. S. Nutely for the Fifth Defendants
Mr. A. Kwimberi for the Ande & Yala Clan
Mr. J. Kil for the Soulo Clan
Mr. P. Ame for the Yenidou Bogasi Clan
JUDGMENT
28th February, 2002
KANDAKASI J: This case concerns and arises out of the Gobe Petroleum Project ("the project"). It has a long history of dispute over ownership of the land and entitlements for equity and royalties from the project. It has been the subject of a number of proceedings both before this Court and the Land Titles Commission ("the LTC").
Upon discovery of oil in the Gobe area, Chevron Niugini and Barracuda commenced drilling for oil in the area. Oil was successfully discovered. Eventually, the project went into operation before the enactment and coming into force of the Oil and Gas Act 1998 ("the Act"). That Act was certified into law on the 5th of February 1999. So the project preceded the Act.
In the course of the drillings and prospecting, customary ownership of land used for camping, heli-pads, and other seismic activities became a serious issue amongst the people in the area, some of whom are in the Southern Highlands Province while others are in the Gulf Province. These came about as a result of claims for compensation for the use of the land taken up by these activities and the eventual prospects of commercial extraction of oil and gas from the area. Competing claims for ownership were the order of events as against one group of purported landowners by others.
In a bid to resolve the almost never ending claims for compensation, royalties and equity participation in the project, the National Government through the Head of State by notice in the National Gazette, appointed his Honour, Justice Salika as a Special Commissioner ("the Salika Commission") under the Land Titles Commission Act 1962 ("LTCA") to determine the customary ownership of the land within the Gobe Main and South East Gobe Oil project areas. It was specifically tasked to inquire into and determine who were the owners of two areas of the land known as Gobe Oil Field PDL 3 and PDL 4 over which prospecting licenses were issued by the State. It was described as:
"All that land containing in area approximately 1082 square kilometres in the Gulf Province and the Southern Highlands Province covering the Baina (Kaiam) village in the Gulf Province then to the East towards Semberigi airstrip in the Southern Highlands Province and then by straight line to the junction of Mubi river and Kikori river confluence in the Gulf Province, then following the South Westerly back of the Kikori river to the point of commencement at Baina (Kaiam Village)."
The Commission listed the Songolo/Haporopake, Imawe Bogasi, Tipurupeke, Luhalipu, Lu’u, Bogoma Kuidodbo, Isowari Bubuku Gohu, Yalla, and Andei clans as parties to the proceedings. It then commenced its hearing on the 8th May 1995. The hearing lasted 5 months, with hearings and inspections taking place in Erave, Kikori, and Mendi. Then on the 29th February 1996, the Salika Commission published its findings. The Decision found in favour of the Songolo (incorporating the Haporopake), Isawari Bubuku Gohu (incorporation Isowari Makof), Imawe Bogasi (incorporating the Yenidou Bogasi, Imawe Kewa and Yesiki’s). The Makena, Dipan Musenori, and Wafi were awarded the land as they claimed.
Fourteen clans became aggrieved by the findings of the Salika Commission and exercised their right of review under "LTCA." Those clans were Muti by Soni Kanu, Isoweri Makof by Daniel Wau, Yesiki by Urumba Kemesi, Imawe Kewa by Jimmy Kinobu, Yenidou Bogasi by Sakaire Nonome, Luhalipu by Soso Tomu, Imawe Bogasi by Leslie Ope, Isoweri Bobuku Gohu by Obed Posou, Ase Tipurupeke by Pipe Eiye, Haukarake Tipurupeke by Apiko Pelipe, Songolo by Sai Doyo, Haporopake by Kampani Sondopea, Yalla by Koke Wape and Andei by Joseph Kaleapo.
A review panel under the LTCA was paneled consisting of the Chief Land Titles Commissioner, Ms. Josehpa Kanawi, as its chairperson, Magistrate, Mr. Bill Noki and Commissioner Mr Clement Malaisa as Commissioners to hear the review application ("the Kanawi Commission"). After a delay of about 5 years a decision on the review was delivered on the 20th May 2000. That decision identified various parts of the disputed land as being owned by the different clans in the following manner:
The Kanawi Commission found that the Imawe Bogasi clan led by Leslie Ope and the Isoweri Bubuku Gohu clan led by Obed Posou had no ownership in the Samberigi, Doupasi, Seipu Kititipati, Epo creek, Apusi Wa’a and the Sisipeke Mubi land regions. That Commission also awarded the Lu’u clan land outside the Petroleum License and Petroleum License Prospecting Area in the Samberigi area or land traditionally known as Makesi Hauhale land.
The Imawe Bogasi, Isewari Bubuku Gohu and the Haporopake clans filed an appeal against the decision of the Kanawi Commission with the National Court under the references Appeal Numbers 111 and 134 of 2000, respectively. Another clan "Sumbulu" also filed an appeal under the reference appeal number 190 of 2000. His Honour Justice Sheehan determined these appeals on the 4th December 2000. His Honour ordered a set aside of the Kanawi Commission’s decision on grounds of lack of jurisdiction and bias on the part of that Commission. His Honour also ordered a return of the ownership issue back to the LTC for re-determination thereby leaving the issue of ownership still unresolved. Whether or not that decision was correct or not is an issue not before me.
After having gone through all of the above frustrating actions and the delay associated to that, finally the parties agreed on the 18th December 2000, to give mediation a go. Mr. Peter Rafles through the Department of Petroleum was engaged has their mediator to resolve all of their outstanding disputes and claims. This has resulted in agreements in two areas.
(1) The issue of customary land ownership be put aside and be later determined by the LTC when the review hearing is reconvened.
(2) While awaiting the ownership determination, there be an "one-off-payment" of the Gobe Landowners Equity Benefits now held in Trust with the Mineral Resources Development Corporation and that the Royalty Benefits be withheld until after the land ownership determination.
These agreements were settled on the 25th of October 2001. Of the issues settled was an agreement that the "one-off-payment" be distributed in terms of 70% of the monies held in Trust be distributed to the Southern Highlands landowners and the balance of 30% be distributed to the Gulf Province landowners. That agreement was signed by all of the parties except Isoweri Bubuku Gohu clan.
The parties are also agreed that, the agreed distribution can not take place until the issues of whether the Act applies to the Gobe project and whether the Minister has powers to deal with the Gobe project benefits distribution under the Act are properly determined by this Court.
Meanwhile, the Minister has determined in accordance with the agreement of most of the parties, the benefits issue in relation to 14.8% of land area that falls outside the LTC’s adjudication boundary. That determination is the subject of the proceedings under O.S. 275 of 2001, where Mr. Andrews’ clients, the Imawe Bogasi and Isawere Bubuku Clans through their respective representatives are the plaintiffs. Those proceedings were to be heard together with these proceedings because the issues to be determined by this Court are substantially the same. However, on the day set for a hearing, the plaintiffs in O.S. 275 of 2001, applied for an amendment to the proceedings, which if granted was going to delay the hearing. The Defendants in those proceedings also took issue on the locus standi of the first plaintiff’s representatives, Mr. Leslie Ope and Mr. Edward Kae. I therefore, directed and ordered that the issue of locus standi be resolved by the clan in a clan meeting before any further step is taken in the proceedings and I ordered a stay of the proceedings pending that.
In these proceedings, six (6) declaratory orders are being sought. In summary the plaintiffs are claiming their rights to be identified as "Gobe Project Area Landowners" so that they can be entitled to be identified as people entitled to benefit from the royalties and equity benefits emanating from the Gobe Projects under the Act. What the parties agree to as certain uncertainties as to application of the Act and the powers of the Minister for Petroleum has given arise to these proceedings. A resolution of the uncertainties will help determine these proceedings and ultimately the resolution of the long drawn disputes and claims through the mediation process. The parties are therefore, agreed that the Court must determine these uncertainties before any further step can be taken.
I directed the parties to agree and file a statement of the relevant legal issues for determination together with a statement of agreed facts and disputed facts as well as their submissions. These they did and I heard the arguments on the 20th of November 2001. At that hearing additional parties were added to the proceedings without any object from any of the parties. I then reserved a ruling to before the end of December 2001. However, due to a circuit to Wewak and Vanimo followed by the Court vacation and a further circuit to Wewak this month, I was not able to deliver this judgement until today.
The agreed issues for me to determine for guidance of the parties as well as the Minister for Petroleum and the State both for this case and any other petroleum project that might come under the governance of the Oil and Gas Act of 1988 are these:
(1) Whether the provisions of sections 167(8) and 168(6) of the Act applies to prevent the Minister for Petroleum from exercising his powers in:-
- (iii) determining Landowner Identifications by appropriate instrument under Section 169 of the Act, and
- (iv) determining distribution of benefits under Section 170 of the Act, for purposes of the Gobe Petroleum Project?
(2) Whether the determinations by the Minister under sections 169 and 170 of the Act is subject to a determination by the LTC under section 15 of the "LTCA"?
(3) Whether the Plaintiffs and the other disputing parties who come from villagers located within the locality of the Gobe Project and are claiming interest in land affected by the Gobe Project are deemed to be "project area landowners" within the meaning of the Act?
(4) Whether the Minister is bound by the findings of the LTC on the question of who are the persons to receive the benefits granted by sections 167 and 168 of the Act?
(5) Whether the Equity and Royalty Benefits referred to in sections 167 and 168 of the Act are State Grants and not interests in any customary land affected by the Gobe Project?
(7) If the Equity and Royalty benefits are State Grants, should the disputes on land ownership prevent the distribution of those grants to the project area landowners?
There is an addition issue, which is raised, in the written submissions as well as the oral arguments that were presented before me by the parties and it is this. Does the Act apply to the Gobe Oil Project, which went into operation before the enactment and coming into force of the Act?
The facts giving rise to these issues are also agreed upon by most of the parties. They are summarised in the statement of agreed facts filed by First Plaintiff’s lawyers Messrs Denise Hauka & Associates on the 20th of November 2001. There is some disagreement on those facts by Mr. Andrew’s and Mr. Nutely’s clients to some extent. The above outline of the history of this case are taken from those agreed facts.
First Issues - Sections 167(8) and 168(6) of the Act and the
Minister’s powers under section 169 and 170 of the Act?
In order to appreciate the context in which Parliament has enacted section 167(8) and section 168(6) and how the first issue may have arisen, it is necessary to set out in full those provisions as well as the other provision that has a bearing and is dependant on these sections.
"167. Equity benefit.
(2) Out of the State equity entitlement referred to in Section 165, there is reserved an equity benefit to be dealt with in accordance with this section.
(3) The cost of—
(a) acquiring the participating interest in the petroleum project for the purposes of the equity benefit; and
(b) development attributable to that participating interest up until the commencement of commercial production of petroleum from that petroleum project,
shall be borne by the State.
(4) Subject to this section and Section 169, the State grants to the project area landowners and the affected Local-level Governments of a petroleum project, if any, an equity benefit in that petroleum project.
(5) The equity benefit granted under this section shall be shared between the project area landowners and affected Local-level Governments of the project in proportions agreed by them in a development agreement, but in default of such agreement in the proportions determined by the Minister, by instrument.
(6) The equity benefit granted under this section shall be held on trust for the grantees in accordance with Section 176.
(7) The participating interest in a petroleum project which comprises the equity benefit granted under this section shall be subject to the obligations applying thereto by law or by agreements to which the licensee is party, save that the State and not the grantee of the benefit shall be responsible for liabilities attributable to that participating interest until the commencement of commercial production of petroleum from that petroleum project.
- (8) If in respect of a petroleum project there are no project area landowners or affected Local-level Governments, the State shall not be required to exercise its State equity entitlement to provide an equity benefit, but if it does so it shall be at liberty to grant that equity benefit to such organisations for such public purposes as it sees fit.
(9) This section shall only apply in respect of petroleum projects which commence development subsequent to the commencement date, and shall not affect arrangements in existence on the commencement date in relation to petroleum projects which on the commencement date are in production or have commenced development.
(2) The royalty benefit granted under this section shall be shared between the project area landowners the affected Local-level Governments and the affected Provincial Governments of the project in proportions agreed by them in a development agreement, but in default of such agreement in the proportions determined by the Minister, by instrument.
(3) The royalty benefit granted under this section shall be payable monthly, by the Minister, out of royalties payable to the Minister pursuant to Section 159.
(4) The royalty benefit granted under this section shall be paid to the trustee and held on trust for the grantees in accordance with Section 176.
(5) If in respect of a petroleum project there are no project area landowners or affected Local-level Governments or affected Provincial Governments, no royalty benefit shall be payable, and all royalties received pursuant to Section 159 shall be paid over to consolidated revenue.
(6) This section shall only apply in respect of petroleum projects which commence development pursuant to licences granted subsequent to the commencement date, and shall not affect arrangements in existence on the commencement date in relation to petroleum projects which on the commencement date are in production or have commenced development.
169. Identification of landowner beneficiaries.
(1) Notwithstanding any other provision of this Act, the persons (other than affected Local-level Governments or affected Provincial Governments) who shall receive the benefits granted by Sections 167 and 168 shall be identified in accordance with this section.
(2) The Minister shall determine, by instrument—
(a) the persons (other than affected Local-level Governments or affected Provincial Governments) who shall receive the benefits granted by Sections 167 and 168; and
(b) the incorporated land groups or, if permitted in accordance with Section 176(3)(f), any other persons or entities who shall represent and receive the benefit on behalf of the grantees of the benefit.
(3) An instrument under Subsection (2) shall only be valid if also signed by the Director and the Secretary of the Department of Treasury or other National Government Department responsible for financial matters.
(4) In making a determination under Subsection (2), the Minister may consider 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.
(5) A petroleum development licensee or applicant for a petroleum development licence may, at any time after an application for the grant or variation of a petroleum development licence in respect of a petroleum project, apply to the Minister for a determination under Subsection (2).
(6) Where a licensee or an applicant for a licence applies to the Minister for a determination under Subsection (5), the Minister shall allow a period of 30 days, or such longer period as the Minister may allow, for persons referred to in Subsection (4) to make submissions or in the case of persons claiming to be project area landowners to advise him of agreements reached by them on the determination.
(7) Where a dispute exists as to which persons or incorporated land groups or other entities should be identified to receive benefits in accordance with this section, the Minister may make a determination under Subsection (2) or may direct that monies or other benefits which are the subject of the dispute shall be held in abeyance pending a resolution of that dispute by other means, and where such a direction is given by the Minister the trustee referred to in Section 176 shall hold such monies or other benefits in accordance with that direction.
(2) Equity benefits and royalty benefits granted to project area landowners under this Act shall be shared among project area landowners or groups of project area landowners in proportions to be agreed by them in a development agreement, but in default of such agreement in the proportions determined by the Minister, by instrument.
(3) Where, in the opinion of the Minister, having considered the results of social mapping and landowner identification studies conducted in accordance with Section 47, some project area landowners have a greater or more substantial occupation or right of occupation of the land referred to in the definition of "project area landowners" or are more adversely impacted by the petroleum project that other project area landowners, the Minister may, by instrument, determine that the sharing amongst project area landowners of equity benefits or royalty benefits in accordance with this section shall favour, on a per capita basis, those project area landowners who have that greater or more substantial occupation or right of occupation or are more adversely impacted by the petroleum project.
(4) A trust deed implemented in accordance with Subsections 176(3) shall provide for the distribution of equity benefits and royalty benefits in accordance with this section."
(Emphasis mine)
It is clear that s.167 and 168 provide for the grant of equity and royalty in any oil or gas project coming under the coverage of the Act. These provisions, in my view, do two things. First, they provide for the grant of equity and royalty to landowners and local-level governments in any petroleum project area. These grants are to be held in trust for them. The grantees are empowered to determine the proportion in which they prefer to receive their grants. If the grantees fail to agree on that, the Minister is then empowered to make a determination for them. Section 170 provides as to the way in which the Minister can arrive at such a determination. If there are no landowners or local-level governments, than the State may grant that to an organization for public purposes. This applies to all projects being developed or coming into operation after the commencement of the Act.
The second thing these provisions do is a preservation of all arrangements in respect of petroleum projects commenced or developed prior to the commencement of the Act. This is done respectively by s.167 (8) and s.168 (6) of the Act, which are in identical terms. Hence, a discussion of one equally applies to the other. For the purpose of our discussion, we will use section 167(8) to work out its meaning and effect. That provision reads:
"This section shall only apply in respect of petroleum projects which commence development subsequent to the commencement date, and shall not affect arrangements in existence on the commencement date in relation to petroleum projects which on the commencement date are in production or have commenced development."
If we paraphrase this provision taking into account the definition of the phrase "commencement date" in section 1 in terms of "commencement date" means the date of coming into operation of this Act" it would read something like this:
"This section 167 (168), only apply in respect of petroleum projects which starts development after the date of the coming into operation of this Act, and shall not affect arrangements in existence in relation to petroleum projects in production or developed as of the date of coming into the operation of the Act."
This clearly leaves no room for any argument as to the meaning of subsections 167(8) and 168(6) of the Act. An issue has arisen in this case not over the meaning of this subsection. Instead, the argument is over the application of the provision. This is apparent from Mr Hauka’s submission on behalf of the first plaintiffs in these words:
"Gobe project commenced development prior to the commencement of the Act. This means that, any equity benefit granted in the Gobe project shall not come under this provision."
"Also, there exists no arrangement in the form of a Memorandum of Agreement (MOA) between the State and the Gobe Project Area Landowners for equity benefits prior to the commencement date of the Act. No valid MOA between the State and the Landowners exists to warrant an already (sic) existing arrangements."
There is no dispute that a Memorandum of Agreement ("MOA") was signed on the 17th day of April 1998. However, the plaintiffs argue that, that is defective and invalid in law on the basis that, the majority of the landowner clans did not endorse the MOA. They claim that, the representatives of only 3 out of the total 22 land groups or clans signed the MOA. The three clans in question are Imawe Bogasi, Sowolo Haporopake and Moloko Tipurupeke. They go on to argue that the law requires a majority of the landowners to sign the MOA if it is to be taken as a Development Agreement under s.50 of the Act. Reliance is hence placed on s.50 of the Act and s.39 of the Interpretation Act, Chp. No.2.
Section 50 of the Act requires any agreement between the State and landowners and affected local-level governments in respect of matters falling under Part IV of the Act must be contained in a development agreement. Sections 167 and 168 fall under Part IV. Going by the wording in sections 167(8) and 168(6), the provisions of section 50 applies only in relation to agreements of the kind spoken of in respect of petroleum projects developed or commencing after the commencement of the Act itself.
Putting aside the issue of the validity of the MOA, in this case, which is not an issue before me, the Gobe Petroleum Project was developed or commenced prior to the coming into effect of the Act. It follows, therefore that, the provisions of section 50 do not apply. Similarly, I am of the view that whether or not the MOA is valid can not be tested against the provisions of the Act, because the MOA was not entered into on the basis of or had to comply with the Act, which did not exist at the time of its execution. The opposite would be the case if the legislature made the requirements of the Act retrospective. Neither the Act as a whole or any particular provision of the Act has been expressly made retrospective. Consequently, the Act or for that matter any particular provision of the Act has no retrospective effect: see Custodian of Expropriated Property and Phoebe Kroening v. Commissioner of Native Affairs (Re Mortlock Islands) [1971-72] PNGLR 621. For these reasons I do not accept the plaintiffs’ submissions.
Notwithstanding the above, the plaintiff’s argue that, sections 167(8) and 168(6) do not prevent the Minister from making determinations under sections 169 and 170 even in the case of the Gobe project. They advance three arguments for that. They first argue that, the whole of s.167 and 168 are only descriptive provisions. They merely describe the manner in which equity and royalty benefits are acquired, how they are to be managed and in the event of default of a development agreement, which is the case, in the Gobe project, they submit that the Minister can make appropriate determinations. As such, it has nothing to do with the exercising of the Minister’s powers under sections 169 and 170.
With respect, this argument makes no sense. On the one hand it argues that these sections are only descriptive. Then on the other hand it states that the Minister can make a determination in the absence of the grantees agreeing as to the proportion in which they wish to receive their grants. As noted earlier, these provisions in my view, respectively grants equity and royalty benefits to landowners and Local-level Governments affected by a petroleum project coming into operation or developed after the date of the commencement of the Act. It then allows for the beneficiaries of the grant to reach an agreement as to the distribution of such grants and failing any such agreement, it empowers the Minister to make the necessary determination for them. Sections 169 provide the way in which the grantees are to be ascertained while section 170 provides as to the way and the manner in which the Minister is to make such a determination. Clearly, therefore, on this view, sections 169 and 170 would not come into operation unless there is an absence of an agreement either under section 167 or 168 of the Act by the grantees themselves at the first place. For these reason I reject the first argument.
The second argument for the plaintiffs is that there exists no valid and binding arrangement in terms of s.167(8) and s.168(6) of the Act. They argue that the existing MOA is invalid and as such the Minister is at liberty to make a determination in accordance with sections 169 and 170 of the Act. This argument with respect is misconceived for two reasons. Firstly, it runs contrary to the well accepted principle in law that, until a contract, an instrument, an order or any act is declared null and void, they a valid. That is why the law allows for instance, a recovery of damages on a quantum meritum basis for an illegal contract. See Keboki Business Group Inc. v. The State & Morobe Provincial Government [1984] PNGLR 281, for a detailed discussion on the principle of quantum meritum.
The position has been clearly stated in respect of irregular and or otherwise invalid court orders by Romer LJ., which is illustrative of the point. That was in Hadkinson v. Hadkinson (1952) 2 ALL ER 567 at 569 in the Court of Appeal where he said:
"It is the plain and unqualified obligation of every person against, or in respect of, whom an order is made by a court of competent jurisdiction to obey it unless and until that order is discharged. The uncompromising nature of this obligation is shown by the fact that it extends even to cases where the person affected by an order believes it to be irregular to even void. Lord Cottenham LC said in Chuck v. Cremer [1846] EngR 924; (1846) 1 Coop T Cott 205; 47 ER 820: ‘A party, who knows of an order, whether null or valid, regular or irregular, cannot be permitted to disobey it. It would be most dangerous to hold that the suitors, or their solicitors, could themselves judge whether an order was null or valid — whether it was regular or irregular. That they should come to the court and not take upon themselves to determine such a question. That the course of a party knowing of an order, which was null or irregular, and who might be affected by it, was plain. He should apply to the court that it might be discharged. As long as it existed it must not be disobeyed.’"
These principles have been adopted and applied in Papua New Guinea by a large number of cases, starting with Justice Hinchliffe in Yap v. Tan [1987] PNGLR 227. These principles with necessary modifications, in my view apply to the contracts of agreements.
In the present case, the MOA has not yet been declared null and void or invalid. It is therefore, valid until at such time it is declared otherwise. As already noted, the validity or otherwise of the MOA is not an issue for me to decide upon. Parties can take that up later on in these proceedings or in another proceeding, if it is still an issue for them. For the purpose of the issues presently before me, all I can do is acknowledge and accept that there exists an agreement. The validity of the MOA can not be tested against the provisions of the Act because of my earlier view that, the Act does not apply to projects pre-dating the coming into force of the Act. Since the Gobe project was developed and came into operation before the Act, the provisions of the Act do not apply in respect of that project, in the absence of any expressed provision to the contrary. For these reasons, I find the plaintiff’s second argument is misconceived.
The second reason for me to find the plaintiff’s second argument misconceived is simply this. The argument with respect overlooks the whole scheme or intent of sections, 167 and 168 which is carried through in section 170. The scheme or intent is apparent from these words in s.167(4) "... in proportions agreed by them in a development agreement, but in default of such agreement in the proportions determined by the Minister, by instrument." These words are repeated in sections 168(2) and 170(2).
This calls for an ascertainment of the intention of Parliament, which can be done through an interpretation of the way in which Parliament has expressed itself. That can be done through a use of the well-known principles of statutory interpretation. Those principles are only flexible guides as they are not part of the substantive law.
In our jurisdiction they are subject to two very important constitutional provisions. First is the requirement in Sch.1.5(2) of the Constitution in the context of interpretation of provisions in the Constitution, for a fair and liberal interpretation of statutes and the second is the call for the paramountcy of justice in s. 158(2) of the Constitution. It is now accepted that, if the provisions of the highest law of the land, the Constitution is to receive such an interpretation then, Acts of Parliament must be given their fair and liberal meaning as well. It is also clear law that, statutes must be interpreted in such a way so as to give effect to the purpose of the legislation under consideration. The only exception to that is where the words used in a statute are so clear as to their intent and they are constitutional: Inakambi Singorom v Klaut [1985] PNGLR 238, per Kidu CJ at 241.
In the present case it is very clear to me that, there are two stages to determining the portion in which landowners and affected local-level governments are to receive equity and royalty benefits. The first stage is for the beneficiaries to determine the proportion in which they wish to receive their benefits. The second stage is dependent on the first stage failing. If the grantees are not able to agree, only then can the Minister determine the proportion in which the grants are to be received.
I am of the view that Parliament did not make a mistake in enacting these provisions. Instead it deliberately made those provisions so that the grantees have the opportunity to consider the issues and arrive at an agreement they could live by instead of an imposed one. Imposed decisions such as a judgement of a court do not necessarily result in pleasing both parties. Instead, one of party becomes a loser and the other a winner. These results in unhappy endings for one of the parties or even the both of them, with long lasting hostilities in some cases. Papua New Guineans have from time immemorial lived in peace in their respective societies through compromises reached through negotiation or agreement between themselves.
Fast moving into the modern economy with the discovery of oil and gas and other non-renewal natural resources, as well as the extraction of other resources, people in the country are suddenly having access to or are becoming entitled to large sums of money within a very short period of time. This comes with a lot of potential for disputes and in some cases, bloodshed. The ongoing dispute in this case is a living testimony of that. In my view, Parliament in its wisdom saw that and saw the need and the importance of getting the people who are entitled to reach agreement at the first place. In order for this to work, it goes without much saying that, real and every opportunity must be given to the people or the grantees to reach an agreement. The Minister or the government of which he is a part must therefore, at the first instance, take a facilitative role. He should not move in swiftly to make a decision on the issue and impose it on the beneficiaries. If he does that, not only will it be against the intent of Parliament but would open a floodgate to bitter disputes amongst the beneficiaries. This might have the result that, projects such as the Gobe one might get delayed and frustrated. This might in turn lead to no development or a project failing to materialise, with both the grantees and the nation missing out on its expected benefits.
Having regard to such eventualities, I am of the view, that simply because there is no agreement of the beneficiaries or grantees, it does not follow automatically that, the Minister must determine the proportions in which the landowners and the affected local-level governments should receive their grants. Instead, the Minister should first take every step possible and open to him to encourage the grantees to agree on the proportion of their benefits. Indeed, the world over is seriously getting into alternative dispute resolutions where the parties to a dispute are given the opportunity to resolve their disputes through an independent third party mediator or a facilitator. It is more appropriate to allow parties to reach agreements at the outset of projects such as the Gobe project so that the kinds of risks I have just mentioned are avoided. Only if such efforts fail to result in an agreement, the Minister should then make the necessary determination for them in the interest of getting the project going.
The third argument of the plaintiffs is based on s. 169 (1) of the Act. They argue that, that provision confers on the Minister the power to make the appropriate determinations. They argue that is so, notwithstanding the provisions of s.167(8) and s.168(6) of the Act. The submission is in effect arguing that the latter provision repeals the former provision by inserting the phrase "notwithstanding any other provisions of this Act..." I do not accept this argument and the suggestion that may flow from it. My reason for that is simple and can be found in the words of s.169(1) of the Act.
Section 169(1) reads:
"Notwithstanding any other provision of this Act, the persons (other than affected Local-Level Governments or affected Provincial Governments) who shall receive the benefits granted by Sections 167 and 168 shall be identified in accordance with this section."
(Emphasis mine)
This provision clearly speaks of identification of persons who are entitled to receive benefits granted by sections 167 and 168 of the Act. It says nothing about the determination of the proportion in which the beneficiaries are to receive their benefits. Sections 167 and 168 already deal with this issue. The identification of beneficiaries and the grant of the benefits and the proportions in which they are to be received are two different things. Hence the different provisions made by Parliament in section 169 for the former and sections 167 and 168 for the latter.
The use of the term "notwithstanding" in section 169(1) can only have meaning within the context of section 169, which concerns the identification of beneficiaries. Hence in so far as the identification of beneficiaries of the grants under sections 167 and 168 are concerned, the provisions of section 169 applies regardless of what any other provision in the Act may say.
If the position were as the plaintiffs submit, then there would be two different meanings open. The first would be that the parties are given the right to agree on the issues of equity and royalty entitlement and the proportions in which they wish to receive such benefits. The second is that notwithstanding any agreement of the parties, the Minister has power to make determinations on these issues for the beneficiaries. This immediately gives arise to an appreciation that the provision for the landowners to agree on this issues is none existent.
It is settled law that "... where two meanings are open ... it is proper to adopt that meaning that will avoid consequences that appear irrational and unjust": Public Transport Commission of New South Wales v. J Murray-More (NSW) Pty Ltd [1975] HCA 28; (1975) 6 ALR 271 at 282 Gibbs J. In the present, if the interpretation argued for by the plaintiff is accepted the result will be an irrational and unjust one. On the one hand, landowners would be given the right to reach agreement for the reasons I have expounded. Then immediately in the next provision take that way and vest it in the Minister. If that were to be the case, Parliament would not have provided for the earlier provisions and grant a power to the landowners to reach an agreement. For these reasons, the plaintiffs’ argument can not be accepted.
Furthermore, if the plaintiffs’ argument was accepted as the a correct legal position, it would effectively allow for a displacement of all or any arrangements existing prior to the enactment and coming into force of the Act. It would do so, without making any provisions for the continuity of those arrangements or make provision for them to have a place with any necessary modifications under the Act since such earlier arrangements as rights and interests attached. Again it is settle law that in interpreting statute a "a construction ... which interferes with the legal rights of a subject to a lesser extent and produces the less hardship is to be preferred to another, having the opposite effect": FACT v. Smorgon [1979] HCA 67; [1977] 16 ALR 721, Stephen J at 729.
In the present case if the position was as the plaintiffs argue, the legal rights of the parties under the MOA would not only be render less significant but would be rendered non-existent without any just compensation or replacement. Accordingly an interpretation which allows for such rights to continue would be preferred.
A careful consideration of each of the other subsections of s. 169 reinforces my view that the section is only dealing with identification of beneficiaries and has nothing to do with grant of benefits and proportion in which the benefits are to be received. Subsections 2 and 3 provide as to the way and manner in which the Minister is to identify those who are entitled to receive the benefits. The next provision, subsection 4 provides as to the matters the Minister must take into account before arriving at a determination as to those who are entitled to the benefits under sections 167 and 168. Subsection (5), grants a right to a petroleum development licensee or an applicant for such a license to apply to the Minister for a determination under subsection 2. That is followed by the next subsection (6), which empowers the Minister to grant up to 30 days or such longer periods as he may consider appropriate for submissions from people claiming to be entitled to be identified as beneficiaries, when an application is made under subsection 5. The final provision, subsection 7, provides that where a dispute exists as to which persons or land groups should be identified to receive benefits in accordance with this section, two things should happen. The Minister may make a determination under subsection (2) or may direct all monies to be held in abeyance pending the resolution of that dispute.
I refrain from expressing any view or make a finding in relation to the plaintiffs’ submission that, the persons identified to benefit in this case are the persons known on record as the disputing parties in the LTC hearings and in the mediation proceedings. I do so because this is not one of the issues for me to determine in this case. Even if it was, it is a matter for the parties to agree upon or failing that a determination by the LTC or the Local Land Court as to their interest in the land and hence their entitlement to receive the grants. I will elaborate on this a little later.
The plaintiffs argue that the parties 70 and 30% benefit sharing serves the purpose of s.169(4) and s.170(2) of the Act. They also maintain there submission that there is no agreement that has pre-existed the Act for the purposes of sections 167(8), 168(6) and 170(2).
In relation to the first lag of this argument, I have already ruled that section 169, inclusive of all its subsections concern the issue of beneficiary identification. It has nothing to do with determining the proportion in which those who are identified as beneficiaries are to receive their benefits. I would have no hesitation in finding that the 70 and 30% distribution agreement is an agreement for the purposes of sections 167(8), 168(6) and 170(2) of the Act. This would be conditional on there being evidence of either the parties agreeing as to who are entitled to be grantees of the benefits under sections 167 and 168 of the Act or that the Minister has identified them as the beneficiaries in accordance with section 169 of the Act. If this issue has not yet been resolved, by agreement of the parties then I am of the view, for reasons already given that, the provisions of section 167(8) and 168(6) and if I may add, section 170(2) do not prevent the Minister from making a determination under section 169. The same applies to a determination of the proportions in which the grantees should receive their benefits. The Minister can only make a determination on that issue only if the parties are not able to reach an agreement after every reasonable and real opportunity has been given to them to reach an agreement. To that extent, the Minister is prevented in my view, from swiftly moving to a determination on the proportions in which the grantees should receive their benefits.
In relation to the argument that there exists no pre-existing agreement of the parties for the purposes of sections 167(8), 168(6) and 170(2), I have already found with the agreement of the parties there exist a MOA signed by about three clans. At the same time I noted that there is a dispute has to its validity. Until the MOA is declared null and void, it is an agreement within the meaning of the provisions just mentioned. This dispute can still be resolved without going to court. There is nothing preventing the parties from agreeing to a set aside of that MOA and to arrive at a new agreement that is acceptable to all of them and get on with the rest of their lives. If they fail to do that, than it may be necessary to resolve the validity of the MOA first. If after that, they are still not able to agree, the Minster could then make a determination in accordance with section 170 of the Act taking into account the factors set out in subsection 3 of that section. This may take a long while and may even end up in further disputes and delays. It would therefore be in the interest of the parties to reach an agreement on this without further delay if they wish to benefit from the grant without further delay. The parties have demonstrated that they can reach an agreement if properly facilitated, as is evidence in the 70 and 30% equity distribution agreement. I encourage them to reach agreement on the remaining issues to enable them to benefit from their grants and the project without delay.
Second Issue – Whether the Ministers Powers under section
169 and 170 of the Act is subject to s.15 of the
Lands Titles Commissions Act 1962?
I have already covered what sections 169 and 170 in general provided for. In short section 169 concerns the way in which grantees of grants under section 167 and 168 are to be identified. On the other hand, section 170 concerns the proportion in which the grants are to be received. The relevant provisions in the context of this issue are s. 169(4) and (7) and s. 170(3). The first two provisions read:
"169(4) In making a determination under Subsection (2), the Minister may consider 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 Government or affected Provincial Governments of the petroleum project in question or from any other person claiming interest or to be affected by the decision of the Minister.
(7) Where a dispute exists as to which persons or incorporated land groups or other entities should be identified to receive benefits in accordance with this
section, the Minister may make a determination under Subsection (2) or may direct that monies or other benefits which are the subject of the
dispute shall be held in abeyance pending a resolution of that dispute by other means, and where such a direction is given by the Minister the trustee referred to in Section 176 shall hold such monies or other benefits
in accordance with that direction."
(Emphasis supplied)
Section 170(3) reads in these terms:
"170(3) Where, in the opinion of the Minister, having considered the results of social mapping and landowner identification studies conducted in accordance with Section 47, some project area landowners have a greater or more substantial occupation or right of occupation of the land referred to in the definition of "project area landowners" or are more adversely impacted by the petroleum project that other project area landowners, the Minister may, by instrument, determine that the sharing amongst project area landowners of equity benefits or royalty benefits in accordance with this section shall favour, on a per capita basis, those project area landowners who have that greater or more substantial occupation or right of occupation or are more adversely impacted by the petroleum project."
(Emphasis supplied)
One word that keeps on appearing in these provisions as well as sections 167 and 168 is "landowners." Sections 167(8), 168(6) and 169(2), (3) and (4) grant the Minister a discretionary power to identify the landowners in project areas or in the vicinity that are entitled to a share in equity and royalty grants under sections 167 and 168. They also confer upon the Minister the power to determine the proportions in which the grantees are to receive the grants. The Minister is to be guided by agreements of project land area landowners or those who claim to be landowners or have an interest, decisions of the courts in the country as to landowner rights, the results of any social mapping and landowner identification studies and submissions of affected provincial and local level governments. Similarly, section 170(3) empowers the Minister based on social mappings and landowner identification studies to grant greater proportion of the grants to landowners who have a greater or substantial interest in the project area or are more adversely affect by a petroleum project.
The Minister’s task could easily be exercised, if the project area landowners or those who are going to be affected agree on who is entitled to benefit and in what proportion. If however, there is a dispute in either of these areas, the Minister is empowered to make a determination taking into account decisions of the courts on landownership, any social mapping and landowner identification studies. If no issue were taken on such determinations or studies, again the Minister’s task would be also easier. If there are disputes as to who should be identified and the proportion in which the grantees should receive their benefits, section 169(7) clearly provides that, the benefits shall be held in abeyance pending a determination of the dispute "by other means."
It is obvious to me that, an identification of the owners of the project land area is a precondition to the Minister identifying the landowners who are entitled to have a share in the grants under s.167 and s.168. That is also a precondition in my view, to the Minister determining the proportion in which the landowners are to receive their grants. In the event of a dispute or uncertainty, the Minister is given no power to determine any landownership issue. Instead, he is to leave it to be determined "by other means" to use the words of s.169(7).
All disputes of ownership and interest in customary land come under the exclusive jurisdiction of the LTC except as may be provided for under the Act. This is clearly and expressly provided for in section 15(1) of the LTCA. That provision states:
"The Commission has, subject to this Ordinance exclusive jurisdiction to hear and determine all disputes concerning and all claims to the ownership by native custom to or the right by native customs to use, any land water or reef, including a dispute as to whether any land is or is not native land and make all such preliminary enquiries for purpose of hearing and determining the disputes and claims."
(Emphasis supplied)
The next section of that Act, section 15A, allows a Local Land Court, ("LLC") which has jurisdiction under the Land Disputes Settlement Act 1975 ("LDSA") to make orders in respect of claims to customary land ownership or having an interest in customary land. Apart from this, no other person or authority is authorised to have jurisdiction over any customary land disputes or claims of any interest in customary land.
It follows therefore that, if there is an uncertainty or dispute as to the ownership or otherwise an interest in a petroleum project land which is customary land, the Minister is obliged under s. 169(7) to allow such issues to be determined by those who have the authority to resolve such issues. The relevant and main Acts in this regard is the LDSA and the LTCA as amended. Under the former, the customary landowners are encouraged to resolve their disputes through a mediation process. If such a process fails to resolve their disputes or claims, they go before the LLC for appropriate hearing and determination. Section 66(1) of that Act makes it clear that where a Local Land Court is established for a particular area, the LTC cease to have jurisdiction for that area. Under the latter Act, the LTC has the exclusive jurisdiction except as is provided for in the Act to deal with such issues.
Having regard to the above, I accept the suggestion that the Ministers powers under sections 167, 168, 169 and 170 are subject to the determination of the LTC. I quickly point out however that, that is not the only decision, the Minister’s powers is subject to. His powers are also subject to any determination of LLC or a District Land Court ("DLC") on appeal from the LLC, which is properly seized, of the matter or issues. Further his powers are subject to any agreement of the parties on such issues as well as any social and landowner identification studies, provided there is no dispute on the results of such agreements and studies. If a dispute arises, the matter must be referred back to the people to go for a mediated settlement or allow the LTC or the LLC in the area to determine those issues. Until the issues are determined in either of these ways, the Minister cannot proceed to make his determinations under the sections in question. This means what is meant in my view by the use of the phrase "by other means" in s.169(7).
I accept also the plaintiffs’ argument that, the exercise of the Minister’s powers under sections 169(4) and 170(3) are separate and require a deliberate judgement on the part of the Minister. Nevertheless, I do not accept their argument that, the Minister has the power to either to accept the decision of the LTC, an argument which equally applies to any agreement of the parties and a decision of the LLC under the LDSA. It is settled law that a determination of a competent authority is binding unless reversed or quashed by another competent and higher authority on appeal or review. That position is clearly provided for in s.15(2) of the LTCA in these terms:
"(2) After the period limited by Part V for review of or appeal against a decision of the Commission has expired, and any proceedings on review have been completed and any appeals have been decided—
(a) a determination of the Commission under this or any other Act is, subject to Section 16, for all purposes and as against all persons conclusive evidence of the ownership as at the date of the decision, of the land the subject of the decision and of rights, titles, estates and interests in the land as set out in the decision; and
(b) the Commission shall forward a copy of its decision to the Registrar of Titles, who shall make such entries in Registers kept by him and issue such documents as are necessary, or as are directed by the Commission, to give effect to the decision of the Commission."
(My emphasis)
What this means is this. The Minister is obliged to act in the exercise of his powers in line with the determination of the LTC or a LLC or a PLC. If a decision of the LLC or the LTC is the subject of an appeal or a review, the Minster must wait of a determination of the appeal or review application. Likewise, the Minster is obliged to act in accordance with any agreement of the parties as to landownership or the proportion in which they agree to receive the grants to them. In my view, any agreement of the project area landowners would be very important because at the end of it all, the determinations of the Minister must be one which such landowners can accept and live with. Such agreements may in effect amount to a compromise of a party’s right to appeal against or apply for a review of a decision of the LTC or a competent LLC or the right to challenge the results of any social mapping and landowner identification studies. If Parliament through the LDSA and the Oil & Gas Act has allowed for parties to reach agreement at the first instance, that should be given paramount importance because of the chances of its long lasting effect in a more satisfying way to all affected parties.
Bearing these in mind, I reject the plaintiffs’ argument that, since the Minister is exercising a distinct and separate power to that of the LTC or any other authority, it can make a determination that is inconsistent with any decisions of either the LTC or the LLC as the case may be, or any agreement of a petroleum project area landowners. The Oil & Gas Act consistently speak of benefits to petroleum project area "landowners" or those claiming an interest in such areas. The plaintiffs’ argument is in effect asking me to rewrite the intent of Parliament to grant equity and royalty benefits to landowners and affected local-level governments by people who may not necessarily be landowners or people who have no legitimate claim over a petroleum project area lands. If such an approach is accepted, it would allow the Minister to allow non-land owners who may be his friends and political cronies to benefit from petroleum projects at the expense of the real landowners and those who are actually affected by the project. It would also allow the Minister, without any expressed Parliamentary approval to question and in fact act contrary to the determination of the LTC or the LLC as the case may be, which are specifically given the expressed mandate to determine customary land ownership and related issues. Hence under this argument, the Minister would become an appellate or review body outside the procedure prescribe under the relevant Acts.
I do however, accept the plaintiffs’ suggestion that, if the various disputing parties in the case of the Gobe project acknowledged each other as the only parties with interest in the project, it would resolve the issue of who are the persons entitled to share in the equity and royalty grants. The Minister would then be left only to decide the proportion in which the parties should receive the benefits, unless the parties also agree on that issue as well. This suggestion falls in line with the scheme and intent of Parliament which I have laboured to clarify above. The intent of Parliament is to allow landowners who are affected by a project like the Gobe to agree on both who is entitled to share in the equity and royalty grants and the proportion in which that is to be received by each of them. Only if they are unable to agree after every step has be taken to facilitate such agreements, a discretion is then vested in the Minister to make the necessary determinations but only in accordance with the provisions of the Act.
Third Issue - Whether the Plaintiffs are "Gobe Project Area landowners"
within the meaning of the Oil & Gas Act 1998.
The Plaintiffs claim that, they are in law deemed to be the Gobe Project area landowners within the meaning of section 3 of the Act. They make reference to various agreements including the 70 and 30% distribution agreement in support of their claim. These agreements they say, evidence a consensus by all of the disputing parties that each of them are persons having customary rights of ownership in various parts of the Gobe petroleum project areas. They also make reference to the various LTC findings, in particular the review decision, which has identified all of the disputing parties as having, rights to own land in parts of the Gobe project area. In the end, they submit that the customary right to ownership of land affected by the project is not in issue. What is in dispute and one which the LTC is to determine is, who owns which portions of land, where does the land boundaries commence and end for a party and the customary name of the land area. Pending such a determination, they go on to argue that, they and the other disputing parties should be declared as the "project area landowners" within the meaning of section 3 of the Act.
Section 3 of the Act defines the phrase "project area landowners" in these terms:
"in relation to petroleum project, the persons who have customary rights of ownership of or registered title to –
(a) any part of the licence area of a petroleum development licence the operations under which are part of that petroleum project; or
(b) any land within the buffer zone of that petroleum project."
If there was no ownership issue or conflicting claims of ownership or an interest in petroleum project area, it would be easy to determine or deem who the owners of such lands are. However, where there is an on going issue as is the case here, the Minster or any authority, including the courts should be slow to recognizing a particular person or a group of persons as such landowners. They should first establish the real landowners or people who have a real interest in such land using the process provided for in the LDSA or the LTCA or the Oil & Gas Act. If this is done, it will avoid or end the on going landownership issues from being raised continuously and thereby avoid delaying or frustrating a petroleum development project.
In the present case, the parties may have agreed that they are all entitled to share in the equity and royalty grants under the Oil & Gas Act. They have at the same time, agreed to defer a determination of the ownership issue to a later date by the LTC. As I already said, having an entitlement to either a claim of ownership or interest in a petroleum project area land is a condition precedent to being identified as persons entitled to receive equity and royalty grants. The parties have the power and or right to determine or resolve the ownership and other competing interest issues or allow the LTC to make a decision for them. This court has no power and is without jurisdiction in my view, in the light of the provisions of LDSA, Oil & Gas Act and the LTCA. I am therefore not at any liberty to determine those issues for the parties. All I can do at this stage is to suggest and urge the parties to take every step they can possibly and reasonably take to resolve the issue amicably by themselves preferably through the mediation process that has already commenced successfully. If indeed there is already a consensus as is submitted by the plaintiffs, that all of the disputing parties are persons affected by the Gobe project and that they are entitled to share in the equity and royalty grants, there should be no difficulty in the parties reaching agreement on both ownership and or other interests in the land and the proportions in which they wish to receive their grants. If they are not able to reach any agreement, only then should the parties request the LTC to determine the issue for them without delay.
Fourth Issue - Whether the Minister is bound by
The Findings of the Land Titles Commission on the question of
Who are the persons to receive the benefits.
I have already said in the context of the second issue that, the Minister’s powers under s. 169(4) and 170(3) are subject to the determinations of the LTC or the LLC or any other Court. For reasons already advanced under that issue, I am of the view that, the decision or findings of the LTC are binding on the Minister for the purposes of his powers under ss.169 and 170 of the Oil & Gas Act. The rational for that in summary is that, such benefits can only go to project area landowners or persons having interests in such land and or those who are adversely affected by a petroleum project such as the Gobe project. The parties have the right and power at the first instance to agree on both their entitlements and the proportion in which they wish to share in the equity and royalty benefits. If they are not able to reach any such agreement, only then can the Minister make a decision for them. If this is inevitable, than the Minister must be guided by any determination of the LTC or the LLC or the agreement of the parties if any, in order to properly exercise his powers.
Fifth & Sixth Issues - Whether the equity and royalty benefits are
State grants and whether any land ownership dispute should
prevent the distribution of those benefits?
The issue of equity and royalty come under Party IV of the Oil & Gas Act. In order to appreciate the context, in which the provisions on these issues are placed, I consider it appropriate that I should briefly touch on what each of the provisions in this part talk about.
Part IV starts with s.164. It provides that nothing in that part affects the right of a landowner or a person having an interest in land affected by a petroleum project to be compensated for his land in accordance with s.118 of the Act.
Section 165 provides that the State has the right to acquire equity participation either directly or indirectly up to a maximum of 22.5% equity participation in every petroleum project in the country. It also provides as to the manner and way, in which this equity participation could be achieved, if the State decides to exercise that right. The next section 166, authorises the State to transfer its equity interest in any petroleum project subject to section 179. In so far as is relevant, the National Gas Corporation is authorised by subsection (2)(d)(iv) of s.179 to acquire by agreement on commercial terms, a participating interest in the Hides Gas project.
Out of the State equity provided for in s.165, there is reserved and granted an equity benefit for the project area landowners and affect local-level governments. The costs of acquiring these benefits are to be borne by the State. This grant is to be shared amongst the project area landowners and the affected local-level governments identified in accordance with s. 169, which I have already covered in full. As already noted under the first issue, the grantees are to agree in a development agreement the proportion in which they will receive their grant. Failing any such agreement, the Minister will make a determination for them in accordance with s.170. The benefits are to be paid into a trustee in accordance with s.176. The benefit or the grant is granted only in respect of petroleum projects developed and coming into operation after the commencement of the Act, which took place on the 5th of February 1999.
Section 168, in a similar way as s.167, grants project area landowners and affect local-level governments a royalty benefit. There are a number of differences. Firstly, this grant is not out of the States equity under s.165. Secondly, this grant is payable monthly by the Minister out of royalties paid to him under s.159. Under that section, the State receives from a petroleum tenement holder royalty at the rate of 2% of the wellhead value of all petroleum produced from the license area.
We have already covered sections 169 (identification of grantees) and 170 (distribution of the benefits) under the first issue. They need not be repeated.
Section 171 provides that the State may by agreement with the project area landowners for the benefit of the landowners, or people in the project area or region provide grants out of the consolidated revenue. This is in addition to the grants under sections 167 and 168. Also, this section allows for the developers of such projects to enter into agreements with the project area landowners for benefits that they may be prepared to give in addition to the grants under sections 167, 168 and 171.
The next two sections 172 and 173, concern benefits by way of grants to affected provincial governments and local-level governments and the proportion in which that is to be received, if there is more than one such government. Except to the extent that this is a grant, they do not shed much light on the issue before me. I am therefore, refraining from any detailed discussion on these provisions.
Section 174 places a limit of 20% on the total aggregate of the various grants to project area landowners and affected provincial and local-level governments. This 20% limit is out of the total benefits the State itself is to or is receiving from a petroleum project. That percentage is to be worked out on a costs analysis basis under section 116.
The affected provincial and local-level governments and the project area landowners are given the freedom by s.175 to negotiate with the project licensee or the developer for additional direct participation interests in the project. The State, through the MRDC, is obliged to provided technical information and assistance as is legally possible to enable them to acquire such interests if they so wish to exercise such rights.
Section 176 provides for the creation of a trustee for the purpose of receiving and managing the benefits of the affect provincial and local-level governments and project area landowners. It specifies the MRDC as the relevant authority to create and manage the trust through a board of trustees. The majority of the trustee is to come from the State with MRDC retaining the chairmanship. This is significant because the control of the trust is in the State.
Of the remaining three sections in Part IV, section 177 is an important one. It specifically provides for people who are not within a project area but who might be affect by pipelines or petroleum-processing facility constructions. They are not granted any benefits similar to the project area landowners. Instead, it is left to the petroleum project developer and such people to agree on benefits to them. What this means is that, people who are affected by pipeline and petroleum processing facilities outside any project area are not project area landowners. Therefore they are not entitled to benefits under sections 167 and 168.
The last two sections deal with the expenditure of monies held in trust for affected provincial and local-level governments (s.178) and the National Gas Corporation (s.179). Except has already mention in respect of s. 179(2)(d)(iv), these provisions are of no relevance to the issue under consideration.
From the above exercise, one thing is very clear. Equity and royalties under the Act are grants by the State out of what it is entitled to receive from a petroleum project that is developed and or one which goes into operation after the 5th of February 1999, when the Act went into force. They are benefits granted to a petroleum project area landowners and affected provincial and local-level governments. These benefits are independent of the landowners right to compensation for land taken up by such a project. Unless people who are affect by a pipeline or a processing facility of such a project come from within a petroleum project area, they are not entitled to receive such benefits.
There is no definition in the Act of the term "grant." A looking up of the word in a thesaurus reveals that the word means, "a gift," "a present," "a gratuity" or "an endowment." Usually, presents or gifts or gratuities or endowments are given as a token of appreciation to the beneficiary. They are for something the beneficiary might have done or what he or she means to the presenter as in the case of an employer paying a good and loyal servant gratuity in appreciation of his or her dedicated services. In such a case, there is no legal obligation to give the gift or the present or the gratuity or endowment.
So what is the State doing in the context of section 167 and 168? The State is out of its own good will, presenting the project area landowners and affected provincial and local-level governments a gift or a present or a gratuity. The reason for this is simple. In so far as the landowners are concerned, it is for having had under their land the petroleum resources and then allowing the State through the developer to extract it. It is also in my view, to keep them happy so as to enable a trouble free extraction of the resources. As for the provincial and local-level governments, they are the immediate State representatives in the area. They are the ones that would come to deal with the people on a day to day basis as to any concerns they might have during the currency of the project. It would therefore, be important for them to support the project at their level in return for the present from the State, which is tied into the proceeds of the project and the project being worked successfully. I have no doubt in my mind that, the experiences of the Bougainville crisis have necessitated the inclusion of such provisions in the Act for the security of a petroleum project. The idea is, if everybody that is affected were kept happy, they would support the project to its very end rather then have another Bougainville.
It follows therefore, in my view that, if that was the intent of Parliament then, it would be necessary to ensure that the people who own the project area and related facilities if not already within the project area be first ascertained before giving them their gifts or presents. That means, the correct land owners or those who have a genuine interest in the project area land must be identified and given the gifts or presents. If this is not properly done, the wrong persons may be given gifts for nothing and that might create more problems rather than resolving them. Unless the people who are actually affected agree on the issues of who should benefit and in what proportion, any landownership issue must first be resolved in the way provided for under the Act in association with the LTCA and or the LDSA. Hence, I am of the view that, if a land ownership issue arises, there should be no distribution of the equity and royalty benefits and the provisions of s.169(7) should be allowed to operate.
My short answer to the issue presented therefore is this. Any landownership issue over a petroleum project area has the effect of preventing a distribution of any equity and royalty benefits until that issue is resolved. This is because the grants are in appreciation of the use of the land coming within the petroleum project area, the ownership of which is in dispute for the security of a petroleum project. Parliament in anticipation of this, enacted the provisions of s.169(7) to allow for the benefits to be held in trust pending a determination or a resolution of the dispute. The opposite of this would be contrary to the intent of Parliament and would be asking for another crisis like the Bougainville one.
This view is supported by the continuous and or repeated use in the Act generally and the sections under consideration specifically that, these grants should go to the petroleum project area landowners. If they were to go to persons having no ownership or user rights and or interests in such land, Parliament could not have used the word " landowners" or people having "interests" in such land. If that were to be the case, it would be hard to ascertain the rational or the logic behind such provisions. Besides, it would be very bad law and clearly disastrous for Parliament to make such provisions because the landowners would not easily allow people other than themselves to benefit from such grants. This would effectively prevent a project from progressing smoothly. The on going dispute and the fight for greater control or access to such grants as evidence by the history of this case, is indicative of such a result if non landowners were allowed to benefit from these grants.
As already noted, it is settled law that Parliament makes no mistakes when enacting laws as long as it complies with the Constitutional requirements. In this case, I am firmly of the view that, Parliament certainly made no mistake in providing for the equity and royalty grants under the Act to go to landowners and not just anybody else for the reasons already given. It follows therefore that, landownership issues must first be resolved before making such grants. If there is to be a delay in that process, Parliament in its wisdom made provisions in the Act for the grants to be held in trust pending a resolution of such disputes. Hence, I am of the view that, any delay in resolving any landownership or interest in a petroleum project area land issue, should not be a reason for the Minister to make a determination that has no regard for the issue of landownership or having an interest in the project area land and the need for such an issue to be resolved properly first by the appropriate authority such as the LTC.
For these reasons I, with respect, reject the plaintiffs’ argument that unlike under the Land Act of 1996, which converts customary landowners ownership rights to a right to compensation upon compulsory acquisition by the State under s.12, the equity and royalty provisions under the Act, grants no right. Instead, I find that ss.167 and 168 provides people with ownership or usury rights in customary land falling under a petroleum project area with a right or entitlement to equity and royalty grants. These are not funds or resources available for all citizens of the country to benefit from in terms of the National Goals and Directive Principles under the general principle of equality of all persons and the need to give every citizen the opportunity to participate in the economic life of the country. I therefore, also reject the plaintiffs’ argument that these grants are grants from which the general public can benefit from as long as one finds favour with the Minister. Such an argument opens in my view the floodgate for the Minister to grant such benefits to people coming within his favour despite the clear language of the Act.
The plaintiffs further submit that the position under sections 167 and 168 must be contrasted with the position under s.118 of the Act. They submit that, under section 118, compensation moneys should be held in trust for the landowners pending any landownership dispute. That should be contrasted with the position under ss.167 and 168, which speak of the grants being held in abeyance. On this basis they argue that, the Minister has discretion under sections 167 and 168 to determine the way in which the equity and royalty benefits are to be distributed.
This argument with respect once again, overlooks, if not, it ignores the particular wording in section 169 which provides as to the way in which the Minister is to exercise his discretion. His discretion is clearly not unlimited or unfettered. Instead, an exercise of his discretion is to be guided by the provisions of subsection (4). As already noted, this provision makes it clear that the Minister must have regard to any determination of ownership issues by the courts and or social mappings and landowner identification studies. Ascertaining who the owner or owners of the land are is a very important part of the exercise of the Minister’s discretion. If there are disputes as to who are the landowners who should benefit from the equity and royalty grants, the funds under these grants are to be held in abeyance. For these reason I also reject this argument.
SUMMARY
In summary, I answered the questions raised in the following way:
Based on the above, I refrain from making a declaration in terms of the first declaratory order sought in the Originating Summons. The Second order or declaration sought in Originating Summons has not been sufficiently raised and argued before me. I therefore refrain from a decision on it. In relation to the Third declaration or order sought in the Originating Summons I make a declaration in terms of my answers to questions 5 and 6 as summarised above. Consequential on that, I declare and order that where there are disputes as to landownership or interest in land taken up by a petroleum project area such a dispute should be resolved by either an agreement of the parties or failing any agreement by the disputing parties, the parties should take every step to allow the LTC to determine the issue for them if there is not already a LLC in their area. I further declare and order that, such a decision shall be final and binding on all of the disputing parties subject to an aggrieved party’s right of appeal or review. I also declare and order that based on such a determination or any agreement of the parties subsequent to or before a LTC or LLC decision and the results of any social mapping or landowner identification studies, the Minister may determine who are the persons entitled to receive the grants and the proportion in which they should receive them.
In relation to fourth declaration and or order sought, I make an order in the form of a declaration that the Minister’s discretion under sections 169 and 170 of the Act are subject to the decision of the LTC or a LLC or any agreement of the parties and taking into account only the matters specified in section 169(4) of the Act.
I decline to make a declaration in terms of item 6 of the Originating Summons for reasons given in relation to question 3 as summarised above.
As I have effectively declined to grant the relief sought by the Plaintiffs, I decline to order costs in their favour. Ordinarily
costs would be ordered to follow the event but in the exercise of my discretion I refuse to do that and instead order that each of
the parties bear their own costs. This is on the basis that, the issues presented by the parties are important and ones any of the
parties now before me could have raised and the plaintiffs did that. I also note that parties have been to mediation seriously and
have agreed that these issues have to come to court for a determination.
______________________________________________________________________
Lawyer for the First Plaintiffs Mr. D. Hauka
Lawyer for the Second Plaintiffs Mr. S. Soi
Lawyer for the First and Second Defendants Mr. J. Kawi
Lawyer for the Third Defendant Mr. B. Andrews
Lawyer for the Fourth Defendants Mr. B. Lomai
Lawyer for the Fifth Defendants Mr. S. Nutely
Lawyer for the Ande & Yala Clan Mr. A. Kwimberi
Lawyer for the Soulo Clan Mr. J. Kil
Lawyer for the Yenidou Bogasi Clan Mr. P. Ame
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