P

T Tambang Batubara Bukit Asam (PTBA) recently turned to President Susilo Bambang
Yudhoyono to resolve its dispute with the Lahat regency administration in South Sumatra.

The state-controlled coal miner claims that it has lost US$2.3 billion in potential revenue since the regency unilaterally granted 26 firms licenses to mine coal in the company’s concession in 2005.

In a separate incident, Churchill Mining Plc., a London-listed miner which lost its case in an Indonesian court, said it would seek an award of $2 billion compensation from an international arbitrator in its dispute with the administration of East Kutai, East Kalimantan, for allegedly granting another firm the right to operate in Churchill’s concession.

The legal headaches suffered by PTBA and Churchill are the latest in a series of protracted concession disputes since the nation’s coal rush began about a decade ago.

Indonesia, the world’s largest thermal coal exporter, has seen fast expansion in the mining sector, which currently accounts for 12 percent of its gross domestic product.

However, the nation’s legal infrastructure and supervisory mechanisms have failed to keep pace with the exploitation, creating not only substantial problems for the environment and for collecting state revenue, but also legal disputes.

The central government, which has passed a large chunk of its authority to granting mining licenses to local administrations, has been unable to come up with a fix.

“There’s no other way to resolve overlapping concession disputes than by going to court. The central government will only uphold a court decision in a dispute,” Energy and Mineral Resources Ministry’s minerals and coal director general, Thamrin Sihite, recently said.

The central government could only register mining permits issued by local administrations and verify their legality under the 2009 Minerals and Coal Law to prevent overlapping licenses, Thamrin added.

As of March, only 40 percent of 10,235 listed companies had received “clear-and-clean” legal status for their concessions.

“The central government will ban miners that fail to clear their status from exporting and selling their coal to PT PLN,” Thamrin said.

State-owned power company PLN is the largest domestic buyer of low- and medium-calorie coal.

But the central government’s claim that existing law has limited its authority in coal-mining management was recently refuted by an investigative audit by the Supreme Audit Agency (BPK).

The BPK blamed the Energy and Mineral Resources Ministry for failing to provide decrees providing a mechanism to supervise or sanction coal miners as one of the root causes in overlapping concession disputes, environmental damage and lost state revenue.

“Miners committing violations have never received any sanctions, encouraging them to repeat their violations and create potential state loses,” the audit said.

The audit also revealed that the number of auditors at the ministry’s Minerals and Coal Directorate General was woefully inadequate to supervise the more than 10,000 mining companies across the archipelago. There are only around 400 staff at the directorate.

According to the BPK, the ministry had not added additional auditors despite mounting oversight problems.

Responding to the audit in November, Thamrin said the ministry was drafting a decree on supervision.

The audit also revealed that the nation might be drawn into international arbitration from overlapping concession disputes unless the central government improved its coal management.

“The central government has to immediately pass the planned national mining map as a guide for the issuance of mining permits by local administrations to prevent the overlapping problems,” said mining expert Pri Agung Rakhmanto of the ReforMiner Institute.