Chevron Niugini Ltd v Sebere Kukuma incorporated Land Group [2003] PGNC 12; N2487 (3 October 2003)

N2487

PAPUA NEW GUINEA

IN THE NATIONAL COURT OF JUSTICE AT WAIGANI]

CIA 277 OF 2002 &
CIA 290 OF 2002 (CONSOLIDATED)

BETWEEN:

CHEVRON NIUGINI LIMITED
Appellant

AND:

SEBERE KUKUMA INCORPORATED LAND GROUP AND
SEBERE GESO INCORPORATED LAND GROUP INC.
Respondents

AND:

CIA 290 OF 2002

BETWEEN:

SEBERE KUKUMA INCORPORATED LAND GROUP AND
SEBERE GESO INCORPORATED LAND GROUP INC.
Appellants

AND:

CLETUS BOMAI, AS THE PETROLEUM WARDEN
Respondents

Waigani: Davani .J
2003: 25 September
3 October

APPEAL – Compensation Claim for damage to land – decision of petroleum warden – no claim for ‘future losses’ under Oil and Gas Act No. 49 of 1998 (the ‘Act’);- assessment of compensation is based on s. 118 (2), s. 118 (6), s. 118 (11) of the Act.

APPEAL – practice and procedure – Warden’s hearing – Mandated procedure affords full and fair hearing to all parties – affected parties to ensure to present evidence.

Counsel:
P. Honey for the Appellant (CIA 277 of 2002)
A. Kwimberi for the Respondent (CIA 277 of 2002)
A. Kwimberi for the Appellant (CIA 290 of 2002)
J. Kumura for the Respondent (CIA 290 of 2002)

3 October 2003

DECISION
(Appeal Hearing)

DAVANI .J: I read the reasons for my decision to counsel and informed them that I would give my detailed written judgment, after making the necessary amendments, at a later date. This I now do.

These appeals are consolidated and come before me for hearing. In CIA 277 of 2002, Mr P. Honey appears for the appellant Chevron Niugini Limited (‘Chevron’) and Mr A. Kwimberi appears for the Respondent incorporated land groups (‘land group’). In CIA 290 of 2002, Mr A. Kwimberi appears for the land groups and Mr J. Kumura of the Office of the Solicitor-General appears for the Petroleum Warden (‘Warden’).

Background to appeals

The appellant in Appeal 277 of 2002 filed Notice of Appeal on 31.5.02. This matter is before me by virtue s. 118 (17) of the Oil and Gas Act No. 49 of 1998 (the ‘Act’), which reads:

"s. 118 Compensation

17. A party to a determination of a Warden under this section who is aggrieved as to the amount of compensation to which he is entitled or which he is obliged to pay, may appeal to the National Court."
    

This appeal arises out of a decision by the Warden held at the office of the Department of Petroleum and Energy, Port Moresby on 24 May 2002. Several determinations or decisions were made by the Warden. These determinations or decisions, as taken from the Notice of appeal are set out below. They are:

"i. That the Sibere Kukuma and Geso Land Group Incorporated received K111,825.69 as assessed accordingly as replacement cost within seven days as of the date of this determination.

2. That a further K100,000.00 be paid by Chevron Niugini to Sibere Kukuma and Geso Land Group Incorporated to off-set the future generation claim/enjoyment within seven days as of the date of this determination.
   
3. That the Sibere Kukuma/Geso Land Group Inc. submit to warden within three months as of the date of this determination, their plans or measures to be taken on the use of the K100,000.00;
   
4. That appropriate remedial rehabilitation measures be put in place by Chevron Niugini Limited to prevent further soil erosion and sedimentation from entering the catchment areas of tributaries of the Kukuma Creek. That the remedial action plan(s) be forwarded to the Office of the Petroleum warden for monitoring purposes within one month as of the date of this determination."
   

The appellant Chevron lodged 9 grounds of appeal, which in summary, appeal against that part of the decision whereby the court made orders that a further K100,000.00 be paid by Chevron to the land group to off-set the future generation claim/enjoyment within 7 days as of the date of the determination. Chevron also appeals against that part of the decision where the Warden ordered that the land group submit to him within 3 months as of the date of the determination, their plans or measures to be taken on the use of the K100,000.00.

The land group raises 3 grounds of appeal, which in effect is an appeal against the total amount of compensation determined in their favour, of K211,825.69, because it is their submission that they were not given the opportunity to properly present their claim. The land group submits that it is entitled to an amount of K500,000.00.

Chevron disputes payment of the extra K100,000.00 to the land group for future generation claims because it submits the amount to be paid for compensation is as determined under s. 118 of the Act. Chevron argues that the chief warden determines the amount to be paid after hearing evidence on matters raised in s. 118 (2) of the Act. It argues that the appropriate evidence was not before the Warden for him to decide on payment by Chevron to the Land group, of the extra K100,000. 00. S. 118 (1) and (2) of the Act reads;

"118. Compensation

(1) A licensee shall be liable to pay compensation in accordance with this section to the owners and occupiers of, and any persons interested in, any private land in relation to their several interests, in respect of the entry on or occupation of the land by the licensee under this Division.
(2) Subject to this section, compensation shall be paid for –

• (a) the deprivation of the use and enjoyment of the surface of the land or any part of it or of any rights customarily associated with it, except where there has been a reservation in favour of the State of the right to such use and enjoyment; and
• (b) damage –
  • (i) to the surface of the land or any part of it, or any improvements on it; or
  • (ii) to any trees, fish or animals,

caused by the carrying on of operations by the licensee; and

(c) severance of the land from other land of any owner, occupier or person interested in the land; and
(d) rights of way and easements; and
(e) any other damage consequential on the licensee’s use or occupation of the land."

Mr Kumura for the Warden submitted briefly that in the event the court finds that the Warden did not properly consider the matter, that it should be referred to the Warden for rehearing. However, he submits in the alternative that the Warden did properly consider all the materials before him before he made the Determination.

I should at this time set out the background facts to this case. These are;

1. during late 2000 or early 2001, Chevron Niugini Ltd constructed the Moran Access Road, for the purposes of their oil field, etc in the Moran area;
   
2. the side-cast materials from this construction left on the side of the road were washed down by the heavy rains over some vegetation, down into the Kukuma creek and then into the subject sago patch;
   
3. the materials/sedimentation destroyed the vegetation on the hill or banks of the creek by covering or killing the trees, grass, and soil;
   
4. the materials/sedimentation built up on the creek bed, thereby reducing the water flow or drying up the pools of water that used to exist in the creek;
   
5. as a result, there was a build up of sediment on the bed of the sago patch, which then affected the normal growth of the sago trees;
   
6. the build up of sedimentation at the mouth of the sinkholes caused the blockage of these holes. These sinkholes existed in the creek and sago patch, which had the natural job of draining out excess water from the sago patch.
   
7. as a result of the reduced flow of water into the creek and the loss of the pools of water, some fish growth and population in the Kukuma creek system were destroyed;
   
8. as a result of the unnecessary long retention of water in the sago patch, the sago trees were affected to an extent where they became unproductive and useless;
   
9. a consequential result of these damage were that the people who own or use these land, water, and sago have suffered loss, in terms of their inability to use their land to plant, hunt, to produce sago, and to fish.
   

I will deal firstly with the land groups appeal.

Land groups appeal

There are three grounds of appeal which are;

1. that the Warden breached principles of natural justice, contrary to s. 118 (10) of the Act;
   
2. the Warden failed to give due weight to the landowners evidence as to the extent of the damage done to their sago patch;
   
3. the Warden gave undue weight to the evidence of Chevron Niugini Ltd.
   

I will deal with each ground of appeal separately.

Land groups first ground of appeal.

That the Warden breached principles of natural justice contrary to s. 118 (10) of the Act.
This provision reads;

"118. Compensation

...

(10) In conducting a determination under this section the Warden shall allow the parties to present their evidence and arguments to him in such manner as he thinks fit, but shall at all times have regard to the principles of natural justice."

The land group submits that they were not allowed to properly present their claim for compensation in that the Warden did not ask them if they wanted to call expert evidence on the extent of damage done to their sago patch. I can only be guided by the depositions before me as to what actually occurred at the hearing.

To answer this, I have had recourse to the Warden’s determination, at pg. 24 of the Appeal Book. In that determination, under the sub-title "Analysis of landowner views as provided" the Warden referred to the land groups views that were before him and which I set out in full below;

"1. damages to their sago patch was permanent and will have a detrimental effect on their contemporary livelihood;

2. sago trees take some considerable period of time in years to grow and reach maturity hence this will be a loss to them and their future generation;
   
3. since sago is their staple food, notwithstanding the high cash economy of the area, they will have to look for sago elsewhere."
   

Furthermore, the Warden also in his reasons at page 25 of the appeal book, said the following;

"In conducting the determination, evidences and arguments were received from both parties as required under s. 118 (10). The determination includes considerations from other professional reports from the Worldwide Life Fund (WWF), the Department of Environment and Conservation (DEC), and the Department of Petroleum and Energy (DPE)."

The above is an illustration of the fact that the Warden, in his determination, relied on professional reports compiled by various organizations and which are attached to his affidavit sworn on 26 August 2002 and which is part of the appeal book. Paragraph 6 of the Warden’s affidavit states;

"6. The Warden evidenced the following reports and arguments;

1. assessment of impact of sedimentation on Otomo and Kukuma Creeks by WWF (November 2001); and
2. Moran Petroleum Project Environmental impacts investigation report into damages effected on Kukuma Sago patch. By Department of Environment and Conservation; and
3. Compensation claim for damage to Kukuma Sago patch from Moran Road Construction from the Department of Petroleum and Energy; and
4. CNGL land dispute report on argument against claim."
   

It should be noted that the Warden’s affidavit was filed after consent orders were obtained by the parties on 26 July 2002 for the Warden to provide to the court within 21 days, documentation relating to the Warden’s determination of 24 May 2002. These orders are set out in full below;

"i. Transcripts and a record of the proceedings in the matter before the warden’s court relating to the decision;

1. The depositions, evidence and all other proceedings before the warden’s court relating to the decision; and
2. The reasons that were given at the time of the decision and other documentation relating to the warden’s determination."
   

As a result of these orders, all documentation there were before the Warden’s court are now before me, enclosed in the appeal book. The Land group has not raised any objections in relation to the contents of the appeal book.

The land group submits that they were not allowed to challenge the submission by Chevron in that the Warden should have given them an opportunity to properly respond to Chevron’s written submission with their own facts and figures because as ordinary villagers they should have been given such an opportunity. They say also that they were not given copies of the various experts reports on the damage and given an opportunity to comment or submit on matters of fact and scientific conclusions contained in these reports. They say again that being ordinary villagers, they should have been given this opportunity.

The Act provides for the procedure to be followed at these hearings. S. 118 (8) of the Act provides that if the licensee and a person claiming compensation are unable to agree on the compensation to be paid by the party, the party may by notice to the Chief Warden, request him or a Warden to determine the amount payable. I again refer to the various reports before me in the Appeal Book for a history of this matter pertaining to advice to landowners to appear at the hearing and the availability of information and reports to the land group.

According to the Central Moran Petroleum Development Project (‘CMPDP’) report (see pg. 69 of the Appeal Book), as a result of loose sedimentation from the road works running into their sago patches, the land group complained that this sedimentation destroyed or was destroying their sago gardens and rivers. Chevron then sought the services of the World Wildlife Fund (‘WWF’) an independent body, to conduct an assessment study on the impact of the sedimentation on the sago patches. These assessments were conducted and reports prepared dated October 2001 and November 2001 (see pgs. 43 to 50 of appeal book). The Moran CA Lands Team then assessed payment to be made based on the existing rates for initial damage, surface damage, land use and the value of self-seeded trees and plants with customary value. They assessed the total claim to be K99,996.24. An assessment process was used which I discuss briefly below. The land groups were advised of this, then responded by their letter of 14.2.02 rejecting Chevron’s offer, making a claim for K500,000.00 (see pg. 39 of Appeal book).

Chevron then sought and obtained reports from other experts which form part of the Appeal book and which I refer to earlier. It required that these experts attend at the scene and conduct an exhaustive study as to the status of the damage. These reports were;

1. Moran Petroleum Project Environmental Impacts Investigation Report into damage effected on Kukuma Sago Patch compiled by Scientific Officer Rex A. Wellin of the Environment Division of the Department of Environment & Conservation dated March 2002 ("MPPERIIR’); (see pgs. 51 to 62 of Appeal book).
   
2. Report from Pendrigh Lui, Policy Officer of the Petroleum Division of the Department of Petroleum and Energy dated 30.4.02 (‘DPEs report’); (see pgs. 63 to 68 of Appeal book).
   
3. Central Moran Petroleum Development Project report covering compensation payment process, methods used and application, value of trees and plants, and a history of the analysis of compensation rates (‘CMPDP’) (see pgs. 67 to 76 of the Appeal book).
   

The background to the process for assessment of compensation is set out in the CMPDP at page 70 of the appeal book which states;

"after the Kutubu Project started operations, the level of exploration activities increased in the Gobe Project area. The entire Gobe PPL and subsequent PDL was and is still under dispute, and is the subject of a land title’s commission determination and review.

With the increasing exploration activities, it was necessary to have a single system of compensation assessment process for Kutubu, Gobe and subsequently Moran.

The agreement guidelines were therefore revised to reflect current values and to establish a schedule of values for vegetation, on a per hectare basis, which could eventually replace the individual tree count approach and which could be generally used project wide."

This reasoning is an illustration of the process of assessment of damages developed by Chevron over the years and which ultimately resulted in Chevron devising a single system of compensation assessment process to take into account all damage caused to the land.

The CMPDP also sets out the methods used and their application. This system of assessment (of damages) is used by Chevron and has proven to be successful. The CMPDP also sets out in it the names of the landowners for Kukuma Creek (table 3.3). This is a brief summary of compensation payable to the Kukuma sago patch owners. Twelve people are named there. Table 3.4 is compensation for other improvements being Rattan, pandanas and fern. These are a few examples of the assessment process applied by Chevron.

The CMPDP also sets out the history of compensation rates payable, derived from the 1990 Kutubu Compensation Agreement and subsequent reviews and updates thereafter. The original rates were at K60.00 per hectare and this was to cover the prevention of the use and enjoyment of the surface of the land, damage to fish or animals hunted, caught or used and severance of land from other land. As at 2001, the cumulative rate per hectare is now K203.78.

The CMPDP concluded that the land group will have to justify their claim for K500,000.00. The report stated in conclusion that;

"in a nutshell, the CA lands teams has set policies and guidelines developed from various government legislations that we comply with and cannot divert from these set of policies and guidelines. Therefore a precedent cannot be created in this instances since with more exploration activities anticipated ahead, any such precedent set now will have an adverse effect on our future operations. Furthermore, our practices will have to be uniform right throughout all project areas which will be seen as fair to the other landowners in those particular areas.

It is therefore only appropriate the CNGL do not entertain such call and the matter be dealt with or determined by the processes of laws and practices enforced in the country by legally constituted authority as stipulated under the Oil and Gas Act."

The land group have not substantiated their arguments where they say they were not allowed to challenge Chevron’s submissions and reports. I have seen that they have been aware since 2001 that such an enquiry was to be conducted. There are no materials before me from them to assist me ascertain why they were not able to obtain those independent figures. Chevron secured the services of WWF an independent body. However the land group did not do so. I do not see how the Warden could not have afforded them an opportunity to be heard when all the reports were before the Warden. The land group had access to these reports, they knew of the date of hearing and were at the hearing. The reports filed, including the independent reports, considered their grievances. In saying that, I refer to pg. 61 of the appeal book which is the MPPEIIR. Page 9 of that report states;

"6.0 Aggrieved landowners position

The landowners demanded for K500,000.00 and have refused to accept the K99,996.24 calculated based on the Valuer General’s Price List of March 2000. Their demand is based on the grounds that;

• Damage is permanent

• Sago is the staple crop and to cultivate new patches will take 25 to 30 years.

• People suffering loss and is expensive buying from others.

7.0 Discussion and Conclusion

The investigation revealed that the sago patch has been affected by sedimentation impacts as a result of the construction of the access road from Moran to APF. However, the people’s perceptions of impacts are different from measurable or scientifically proven impact. The impact however is not permanent though the palms take about 15 years to reach maturity. Natural restoration and clearance of the sinkholes would occur in time and the palms could fully recover if the erosion upstream is controlled and minimized.

Erosion can only be prevented through revegetation of barren land surfaces and disturbed land on the road corridor.

....

8.0 Recommendations

The following four recommendations are based on the findings and impact investigation conducted on the impacted site. It is recommended that;

1. that appropriate remedial rehabilitation measures are taken to prevent soil erosion and sedimentation from entering the catchment areas or tributaries of the Kukuma Creek;
2. that a routine monitoring program be executed by Chevron Niugini to monitor impacted areas including the sago patch for 18 months. A report be submitted for all relevant stakeholders informing of the rehabilitation progress and monitoring done on a six-monthly basis.
3. That appropriate actions are taken upstream of the Kukuma Creek (along the flow lines/access road) to minimize and control soil erosion;
4. That the valuer general’s pricelist is the only guidelines for setting values to properties damaged for settling compensation."
   

The MPPEIIR concludes that the damage is not permanent, as claimed by the land group. It also suggested and recommended remedial measures to minimize and rectify the damage. (see pgs. 61 and 62 of appeal book). I have heard that the land group have actively prevented Chevron’s employees and agents from gaining access to the land to do remedial works. And that is not denied.

The land group were advised to attend this meeting as confirmed by the Warden’s letter to Chevron and to the chairman of the land group dated 22 May 2002 which is at p. 41 of the Appeal Book. It advised that the hearing would be on Friday 24 May 2002. And as set out at s. 118 (10) of the Act, when conducting the hearing, the Warden allows parties to present their argument and their evidence to him in such manner as he thinks fit but shall at all times have regard to the principles of natural justice. The land group then had their opportunity to say why an award of K500,000.00 is appropriate and to substantiate that. In any event, the Warden’s orders favoured the land group in that payment was awarded for regeneration of sago. It means the Warden did consider and order in their favour, an award for future generation or regeneration of sago.

I find that the Warden carefully considered all material that was before him and did not in any way, breach principles of natural justice.

Land groups second ground of appeal.

That the Warden failed to give due weight to the landowners submissions on future loss.

S. 118 (11) of the Act states then that the Warden shall make his determination based on the evidence and arguments presented and submitted to him and in accordance with "the principles of compensation contained in this section". The land group submits that s. 118 (2) (b) of the Act, more particularly the phrase "subject to this section" means that the Warden may make an award for future loss. Mr Kwimberi for the land group submits that s. 118 (2) of the Act and s. 118 (12) are broad enough to include compensation for future damage. It is necessary that I set out these provisions in full. They read;

"118. Compensation

....

(2) Subject to this section, compensation shall be paid for –

(a) the deprivation of the use and enjoyment of the surface of the land or any part of it or of any rights customarily associated with it, except where there has been a reservation in favour of the State of the right to such use and enjoyment; and
(b) damage –

(i) to the surface of the land or any part of it, or any improvements on it; or

(ii) to any trees, fish or animals,

caused by the carrying on of operations by the licensee; and

(12) Where the Warden considers it impractical or inexpedient to assess the full amount of compensation to be paid in satisfaction of the loss or damage, he may make a determination of the amount of compensation payable in respect of a particular period or item of loss or damage and defer his determination of the remainder of the claim until a later time.

..."

From my reading of s. 118 (2) and s. 118 (12) of the Act, they do not provide for payment of compensation for future damage. S. 118 (12) only states that if it is "impracticable or inexpedient" to assess the full amount, he may defer his determination of the remainder of the claim until a later time. This case does not fall within that category. What is "impracticable or inexpedient" will probably depend very much on the circumstances or the manner in which investigation was conducted. It does not in my view, provide for assessment of future loss. I consider that to be a misconception by the land group.

In relation to the relief sought by the land group, that the matter should be referred back to the Warden for a proper determination after allowing parties to adduce evidence and make submissions as to:

• whether the damage done to the sago is permanent;

• the number of sago trees affected and how long the sago patch will naturally recover;

• if remedial measure are taken, how long into the future will such damage exist;

• how much compensation may be assessed for future loss;

• where remedial measures are taken and where remedial measures are not taken,

it is the court’s finding that the reliefs sought have already been addressed by the various reports that are now before me, more particularly that damage to sago is not permanent and can be remedied and that the land group have prevented these remedial measures from being implemented by Chevron. The court finds that the reliefs sought are not justified under the circumstances.

Chevrons appeal

Having reviewed the reports, the court finds that the Warden’s determination for payment of the further K100,000.00 to the land group is unjustified and is unsupported by evidence. The court finds also that a claim to offset future generation claim/enjoyment, is not provided for under the Act.

Conclusion

It is imperative that in matters involving assessment of compensation, that proper legislated process is followed. The various departments and bodies involved in the assessment of compensation have always relied on certain processes which I have seen in the various reports before me. The court cannot skirt these processes to satisfy the claims of various landowners or companies. There is remedy for the land group under s. 118 (12) and s.118 (14) of the Act that if there are further claims for compensation they feel must be heard by the Warden, those claims can be put to the Warden following procedure available to them under s. 118 (1) and (2) of the Act. There is no remedy for claims that cannot be properly quantified or that are not properly quantified, more particularly "future loss". This is to avoid or prevent a flood gate of claims that are not genuine. Any claim for damage must be supported by evidence, more particularly scientific evidence on the nature of the loss or damage and whether these losses can be remedied, rectified or not.

The court is not the legislature. The court must comply with procedure specifically provided for in legislation. That is mandatory. Failure to do so is bad precedent and must be avoided at all costs.

Court’s orders

Therefore, the court makes the following orders:

1. the court dismisses the appeal filed by the land group in CIA No. 290/2002;
2. that in respect of CIA 277/2002, the court orders that the Sibere Kukuma and Geso Landgroup Inc. receive K111,825.69 as assessed accordingly by the Petroleum Warden on 24 May 2002, as replacement costs;
3. the land group shall pay Chevron’s costs of this appeal, to be taxed if not agreed.

______________________________________________________________________
Lawyer for the Appellants/Respondents : Kwimberi Lawyers
Lawyer for the Respondents/Appellants : Gadens Lawyers