W

hile some members of the House of Representatives say they appreciate the government'€™s plan to change PT Freeport Indonesia'€™s contract of works into a license, some of their fellow politicians say the move could potentially breach existing law.

House'€™s Commission VII deputy chairman Satya Widya Yudha said Freeport Indonesia'€™s willingness to change its contract of work (CoW) status into a license, which will put the Indonesian government into a higher position, should be appreciated.

'€œThe law mandated that the CoW be altered into an IUPK [a special mining license] after the contract expires. Freeport Indonesia is willing to change it before the expiry. It shows that the company is committed to its investment,'€ Satya said on Thursday.

He argued the planned move was in line with the law and thus no revision or amendment needed to be made to the law.

Earlier, the Energy and Mineral Resources Ministry said that it had reached a deal with Freeport Indonesia to change the company'€™s CoW into an IUPK. The change is mandated by the 2009 Mining Law, which is aimed at ending the contract regime in the mineral and coal industry in Indonesia.

Under the new license regime, the government will have a higher position and companies won'€™t be able to file arbitration suits if there is any dispute.

However, the law also mandates that the government honor existing contracts of work until they expire, meaning that any change into an IUPK should be made after the contract'€™s due date.

Legal experts have raised concerns, saying the government'€™s move to change Freeport'€™s contract before it expires would breach the Mining Law.

Freeport Indonesia, a subsidiary of US-based Freeport-McMoRan Inc., has a CoW that will expire in 2021. Critics have also said that the company'€™s agreement to change its arrangement into an IUPK is part of an attempt to seek an early assurance that it will be able to continue its operations in Indonesia after 2021.

Under the law, an IUPK has a maximum term of 20 years and can be extended twice, with subsequent terms lasting 10 years each. Getting an assurance for its operations to continue after 2021 is seen necessary by Freeport Indonesia as the company needs enough time to pay back for its planned underground mining and a smelter project in the country.

If the company continues holding its CoW, it can only request for its operations to continue two years before expiry: That is, in 2019 when Joko '€œJokowi'€ Widodo'€™s first term as president is set to end.

Meanwhile, lawmaker Achmad Farial said the law would need to be revised to accommodate the new deal between the government and Freeport.

'€œThe law should be revised and, in the meantime, the government had better issue a Perppu [a government regulation in lieu of law] if it wants the plan to be exercised,'€ Farial said.

Moreover, he added, issuing an IUPK would take time because before any issuance of a license the related working area must be returned first to the government to be declared as the state reserve area. Then the government should consult with the House of Representative before issuing the IUPK.

Under the national legislation program, the revision of the 2009 Mining Law is actually being planned, along with the Oil and Gas Law. The Mining Law should be revised because it has to adjust articles regarding the authority of local administrations in the mineral and coal industry. As the IUPK issue has emerged, it will likely also be discussed, Farial said.

However, to date, the planned revision of the Mining Law has yet to begin and no meeting to discuss the planned revision has taken place at the Commission VII.