Multinational Monitor

JAN/FEB 2002
VOL 23 No. 1


Derailed: The UK’s Disastrous Experience with Railway Privatization
by Brendan Martin

Business Goes to School: The For-Profit Corporate Drive to Run Public Schools
by Barbara Miner

Off the Grid: Mexico’s Free Market Extremism and Labor’s Challenge to Privatization
by David Bacon

Power to the People In South Africa: Operation Khanyisa! and the Fight Against Electricity Privatization
by Patrick Bond

System Failure: Deregulation, Political Corruption, Corporate Fraud and the Enron Debacle
by Andrew Wheat


Theft of the Century: Privatization and the Looting of Russia
an interview with
Paul Klebnikov

Undermining Security: A Warning Against Social Security Privatization
an interview with
Dean Baker

Accounting for Bad Accounting
an interview with
John Coffee



Behind the Lines

Preparing for the Next Enron

The Front
The Big Ugly at Ok Tedi - The Boeing Boondoggle

The Lawrence Summers Memorial Award

Names In the News


The Front

The Big Ugly at Ok Tedi

In an extraordinary move, the Papua New Guinea (PNG) government has passed legislation that prevents any government agency from taking or supporting “in any way” proceedings against the mining multinational BHP-Billiton “in respect of an environmental claim” over damage caused by the Ok Tedi mine.

In mid-December, the Ok Tedi Mine Continuation (Ninth Supplementary) Act was presented in parliament and rammed through in a vote later the same day. Central to the legislation is a provision allowing BHP to offload its 52 percent share of the mine — which is scheduled to close in 2010 — into a development trust in return for BHP being insulated from further liabilities for environmental damage.

A BHP-commissioned report warned that up to 2,000 square kilometers of forest could be killed by the tailings and a “total collapse of the fishery” was a possibility. For nearly two decades, BHP has operated the mine without a tailings dam, simply dumping 80,000 tonnes of waste rock a day into the Fly and Ok Tedi river system, causing environmental devastation downstream, and imperiling the livelihoods of tens of thousands [see “The Big, Ugly Australian Goes to Ok Tedi,” Multinational Monitor, March 1996].

The legislation “is typical of the way BHP has dictated terms to the PNG Government ever since it came to Papua New Guinea,” says landowner leader Gabia Gagarimabu, now a member of parliament. “If we let BHP walk away from its environmental and social responsibilities now, Papua New Guinea will come to regret this decision forever.”

The legislation also gives effect to the Community Mine Continuation Agreement (CMCA), which negates a claim for damages by 30,000 landowners against BHP before the Supreme Court of Victoria, an Australian state.

In 1996, BHP reached an out-of-court settlement that included payment of approximately 40 million Australian dollars in compensation as well as the dredging of tailings from the river in an attempt to limit further damage [see “BHP’s Dirty Deeds,” Multinational Monitor, September 1996].

The legal action was reinstated in April 2000 when Gagarimabu and another landowner leader claimed that BHP had breached the terms of the settlement. In particular, they claimed that BHP had not complied with a provision requiring investigation of a tailings dam to prevent further waste entering the river system.

However, the CMCA agreement seeks to bypass the Australian class action by expressly exempting BHP “from all and any demands and claims arising directly or indirectly from the operation of the mine.” One provision recognizes “the signature … by a person representing or purporting to represent a community or clan, or that person’s delegate, binds all members of that community or clan.”

Community leaders and their allies say that the many community residents who have signed the CMCA and forfeited their rights did not understand the consequences of signing the agreement.

“Based on my conversations with the local people, it is quite clear that the people who are signing this agreement do not know what they are signing” says Almah Tararia of the PNG Environmental Law Centre

“We have been informed by landowners that they have not been told what the Mine Continuation Agreement’s effect will be; and those that have not signed it, do not want to sign it,” says Tararia.

In December, during just a few days, more than 1,500 landowners from over 50 villages made affidavits opposing the signing of the Mine Continuation Agreement. The affidavits state that the landowners did not give any authority to anyone else to sign away their legal rights.

The former prime minister of Papua New Guinea, Sir Michael Somare, is challenging the constitutional validity of the legislation before the PNG Supreme Court. The challenge argues that the legislation is unreasonable and breaches the constitutional provision for the equality of PNG citizens.

BHP argues that the CMCAs are “an expression of the informed consent of the affected communities to the mine’s continued operations, and acceptance of an integrated set of measures to compensate them for the mine’s impacts on their communities.”

The government has been eager to maintain operations at the mine, which accounts for 10 percent of Papua New Guinea’s gross national product.

— Bob Burton is editor of Mining Monitor,
a publication of Australia’s Mineral Policy Institute

Boeing Boondoggle

In a move furiously denounced by a broad left-right coalition, Boeing-friendly members of Congress inserted a provision in the Defense Appropriations bill requiring the Air Force to lease 100 Boeing 767s for use as tankers, over a 10-year period.

The Air Force did not request the planes, failing to include the 767s in a list of its top 60 priorities. The request for the planes did not appear in the president’s budget, or in the bill considered by the relevant Congressional appropriations subcommittees.

As the full Senate appropriations committee was considering the Defense appropriations bill, the lease provision was inserted at the last minute at the behest of Senator Ted Stevens, R-Alaska, the ranking member of the Senate appropriations committee, and Senator Patty Murray, D-Washington.

The lease arrangement will be far more expensive than an outright purchase. The Air Force will lease the planes at a pricetag of $20 million per plane per year, for a $20 billion expenditure (100 planes, 10 years). There are laws prohibiting lease arrangements that are more expensive than direct purchases, but Congress waived those rules in appropriating the money for the Boeing 767s.

Representative Norm Dicks, D-Washington, justified what he acknowledged to be an “unusual arrangement — leasing, rather than purchasing” on the grounds that the Congress needed to act quickly to acquire the 767s.

“With more of our force now deployed in the continental United States, and with the risk of being locked out of forward air bases during potential conflicts, these tankers are the ‘legs’ that allow us to reach trouble spots around the globe,” Dicks said. “And with the entire fleet of aerial refueling planes averaging more than 40 years old, we had to act promptly,” he added.

The lease arrangement brings other unique costs. The government will accrue extra expenses to convert the commercial aircraft to military configurations. The cost will be about $30 million a plane (total cost: $3 billion). Because the planes are to be acquired through lease, rather than sale, the government must return the planes to Boeing — in the condition in which they were purchased. When the 10-year lease is over, it will cost the government another $30 million a plane to reconfigure the planes back to commercial format, for a total of another $3 billion.

Senator John McCain, R-Arizona, tried to block the deal, but with no success. The Boeing giveaway, he said, “I’m sure is the envy of corporate lobbyists from one end of K Street to the other.” McCain estimated the cost of lease deal was, in total, more than five times the cost of outright purchase.

A coalition of individuals and citizen groups from across the political spectrum joined McCain in denouncing the “gross exhibition of corporate welfare.”

Proponents of the deal said that not only will it benefit the Air Force, but that it will provide important support to Boeing, which has faced declining orders from commercial airlines following September 11. The lease deal “is good news for Boeing, for its workersand for Washington state’s economy,” said Murray. “This lease will provide a tremendous boost to the workers and the economy in the Puget Sound and will provide our military with the resources they need to do their jobs.”

In a joint letter, Ralph Nader, Public Citizen, the Project on Government Oversight, Taxpayers for Common Sense, Grover Norquist’s Americans for Tax Reform, the National Taxpayers Union and other argued that, “If some in Congress believe Boeing needs to be subsidized, then they should propose direct subsidies to the company, and let Congress fully debate and vote on the issue before the American people, following comprehensive public hearings on the proposal.”

But even as McCain and the citizen groups sounded the alarm, the appropriations bill sped through Congress — with added Boeing planes tacked on. In conference committee, where different versions of bills passed by the House of Representatives and Senate are reconciled, negotiators added a provision for the 10-year lease of four Boeing 737s. These were designated for executive travel, but will likely be used primarily for Members of Congress. Congress has now passed and President Bush has signed into law the entire Boeing package.

— Robert Weissman


The January/February 2002 Lawrence Summers Memorial Award* Goes to Audubon International, an enterprise not affiliated with the environmental group, the National Audubon Society. Audubon International blesses the environmental friendliness of golf courses, despite the huge environmental damage they cause.

Developers are proposing a PGA Village for San Antonio that would feature at least three golf courses, plus a large hotel, housing and retail areas. PGA Village is seeking subsidies from local government authorities. There is considerable local opposition to the project. Supporters dismiss environmental criticisms, saying the golf courses will abide by ecologically friendly “New York Audubon Society” standards.

An PGA Village opponent, Stephen Grigory, told the San Antonio Express-News’ Carlos Guerra that “I got suspicious that the Audubon Society would sanction this because there's no way a golf course can significantly reduce the water it uses or the quantity of pesticides they need.”

On the web, Grigory found the "Audubon Society of New York," which has nothing to do with golf. Then he found “Audubon International.” “Audubon International grew out of the Audubon Society of New York State,” explains the golf-friendly group's Web site (, but “is not affiliated with the National Audubon Society or any other Audubon organization.” The site also reveals that “major financial support for the Audubon Cooperative Sanctuary Program for Golf Courses is provided by the United States Golf Association.” Other contributors include four golf course superintendents associations, golf courses and a mower manufacturer.

Source: Carlos Guerra, “Do PGA Village's ecology-friendly credentials check out?,” San Antonio Express-News, July 19, 2001. Thanks to Greg Leroy for highlighting this story.

*In a 1991 internal memorandum, then-World Bank economist Lawrence Summers argued for the transfer of waste and dirty industries from industrialized to developing countries. "Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?" wrote Summers, who went on to serve as Treasury Secretary during the Clinton administration. "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. ... I've always thought that underpopulated countries in Africa are vastly under polluted; their air quality is vastly inefficiently low [sic] compared to Los Angeles or Mexico City." Summers later said the memo was meant to be ironic.


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