Royalty is the payment made because minerals are produced. Section 148 of the Mining Act 1992 requires it; the detail sits in separate legislation.
Section 148 — the obligation
Royalties for mine products shall be paid in accordance with the provisions of this Act.
The Mining Act itself does not fix the rate or the recipients. Those are dealt with by the Mining (Royalties) Act 1992, which the Mining Act refers to in two places: section 154(4), which preserves it as the exception to the prohibition on production-linked compensation; and section 161(2)(e), which allows the Minister or Managing Director to require production of any information required under the Mining (Royalties) Act 1992.
The Mining (Royalties) Act 1992 is not carried in the PacLII Papua New Guinea legislation databases. It is named here rather than linked, so that no unverified link is given; the current text and rate should be obtained from the Mineral Resources Authority or the Department responsible for treasury matters.
Royalty and compensation are different things
| Royalty | Compensation | |
|---|---|---|
| Why it is paid | Because minerals are produced | Because of entry, occupation, loss and damage |
| Statute | Mining (Royalties) Act 1992; Mining Act s 148 | Mining Act Part VII, ss 154–160 |
| Measured by | Production or value of mine products | The eight heads in s 154(2), plus s 154(6) for neighbouring land |
| Who fixes it | The royalty legislation | A registered agreement or a Warden’s determination |
| Enforcement | Under the royalty legislation; unpaid royalty is deducted from the security (ss 139(2), 143(2), 144(2)) | A condition of the tenement (s 159(c)), binding as a contract (s 159(d)), and deducted from the security |
No compensation shall be payable and no claim shall lie:
(a) in consideration of permitting entry on to the land for exploration or mining purposes;
(b) in respect of the value of any mineral which is or may be on the land; or
(c) by reference to any rent, royalty or other amount assessed in respect of the mining of the mineral,
other than as provided for in the Mining (Royalties) Act 1992.
And a person who pays or agrees to pay compensation in respect of any of those matters is guilty of an offence: a fine up to K10,000.00 or imprisonment for up to five years, or both.
Because under section 5 the minerals are the property of the State. A landholder cannot be compensated for the value of something they never owned. What they are compensated for is what they do own and lose: the use of the surface, the trees, the gardens, the improvements, the access, and the fabric of community life.
The production-linked share is delivered through the royalty regime, and through the agreements that follow the development forum.
Where benefits are negotiated
For a special mining lease, section 3(1) requires the Minister to convene a development forum before the grant, to consider the views of those affected, conducted according to procedures affording a fair hearing to all participants. Those invited are those the Minister considers will fairly represent:
- the applicant;
- the landholders of the lease land and of other tenements to which the proposals relate;
- the National Government; and
- the provincial government.
That is the setting in which benefit arrangements — including the distribution of royalty and any equity participation — are discussed. Section 17 separately allows the State to enter agreements about a mining development, including provisions for the acquisition by the State, directly or indirectly, of a participating interest. See acquisition of State interests.
Section 17(2) — the State may not enter a special agreement about the payment of any tax, duty, fee or other fiscal impost, or grant any exemption, moratorium, tax holiday or other indulgence howsoever described.
Section 19 — a mining development contract governs the development, but to the extent of any conflict with the Act, the Act prevails. So a contract cannot override the compensation provisions or the section 155 bar on entry.
What a landowner group should do
- Separate the two conversations. Compensation is built from the section 154 heads and settled under Part VII; royalty and other production-linked benefits are dealt with under the royalty legislation and the agreements that follow the development forum.
- Never accept a payment for permitting entry or a share of production dressed up as compensation. It is not payable, and paying it is an offence.
- Settle representation early — who speaks for the group, and on what authority. An incorporated land group with a constitution and a membership list is the most defensible basis, and the most durable vehicle for receiving and distributing money.
- Ask for the numbers — the royalty rate, the expected production, and how any distribution is calculated.
- Ask how money will reach members, and settle that in writing before anything is signed.
- Get independent advice for the group, arranged and paid for by the group — the Public Solicitor, or a firm from the law firms directory.
Sources
- Mining Act 1992 — ss 3, 5, 16A, 17–19, 139, 143, 144, 146–150, 154, 159, 161
- Land Groups Incorporation Act — PacLII 1986 Revised Edition
- Mineral Resources Authority (Amendment) Act 2018
Before relying on anything here, read the current text of the Mining Act 1992 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.