SANTOS, the operator of the Kutubu oil fields in the Southern Highlands, has been given 90 days to pay K50 million in environmental damages compensation to the Kutubu landowners by the Conservation Environment Protection Authority (CEPA).

This is the first determination for environmental damage since the law came into effect and its a warning to those who break the environment laws and they include mining companies, Petroleum Developers, construction companies and quarry operators.

The Director of Environment Jude Tukuliya (pictured) made a review of the environmental damage done to the water sources of the Yakerabo and Gese Communities of Lake Kutubu, Southern Highlands by Oil Search Limited (now Santos) as a result of the Loss on Circulation (LOC) of the drilling muds, during the drilling of Kutubu 2x in March of 2007, as reported to the Australian Registered Office on the May 17, 2007.

Pursuant to Section 87 (6) of the Environment Act 2002, the complainant’s counsel, by notice to the Director of Environment has applied for the Director of Environment to review and determine the compensation via a letter dated September 1, 2023.

Mr Tukuliya said on November 1, 2006, water extraction/ water discharge permits were issued by then Department of Environment and Conservation (now Conservation and Environment Protection Authority (CEPA)).

He said on the March 13, 2007, Oil Search commenced drilling at Kutubu 2X (PPL 219) and on May 9, 2007, the Yakerabo and Gese villagers observed unusual discoloration of their drinking water sources at Yakerabo and Gese springs.

He said on November 17, 2007, OSL PNG Ltd reported Loss on Circulation to Australian Registered Office.

On May 25, 2023, CEPA wrote a letter to OSL to commence negotiations with the landowner legal counsel on the compensation amount of K50 million and reach agreement within 90 days as required by section 87 (6).

On September 1, 2023, the landowner legal counsel wrote a letter to Director of Environment giving notice and applying to the director to determine the compensation pursuant to section 87(6) of the Environment Act 2000.

Considering all facts through the review, the Director of Environment made the following determination:

•  After Oil Search Limited, Santos as new operator and permit holder, legally assumes all responsibility and take carriage of all liabilities of the previous operator,
•  That the incident on Loss on Circulation (LOS) of chemicals used for drilling at Kutubu 2x, occurred due to operational drilling problems during that particular time of drilling and professional negligence by the permit holder.
•  The permit holder has also failed to immediately report the incident to the Director of Environment within 14 days which would be the standard required mandatory time frame under the permit conditions.
•  Permit holder’s failure to report the incident to the Director for Environment constitute non-compliance by the permit holder
•  Oil Search PNG Limited, a subsidiary of Santos, was given the opportunity as required under section 87 (6) of the Environment Act 2000 to take up discussion with the Complainant’s Legal Counsel to reach an agreement within 90 days but this negotiation never eventuated.
•  The amount of K50 million must be paid within 90 days as of the date of receipt of this letter. The amount for the compensation has been maintained because the permit holder has failed to take up a serious discussion with the complainant’s lawyer within 90 days as required under section 87 (6) of the Environmental Act of 2000. To discuss and negotiate on this amount and reach an agreement.
•  The Director of Environment has determined January 10, 2025 as the date for the compensation to be paid at the Office of the Director of Environment, on the 7th floor of Dynasty Tower, Savannah Height, Waigani at 10am.

Mr Tukuliya said either party aggrieved by the determination of the Director of Environment is at liberty to appeal to the National Court of PNG, Pursuant to section 87 (13) of the same Act.

He said the Lake Kutubu environment damages claim was included as an agenda when the Environment Council convened on April 11, 2024.

The Environmental Council Meeting on August 22, 2024 has resolved for the Director of Environment to endorse and issue the Review and Determination to the Permit Holder.

Santos has declined to comment.