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Jakarta Post

Resolving imbroglio in mining

  • Editorial Board

    The Jakarta Post

Jakarta   /   Mon, February 24, 2020   /   08:08 am
Resolving imbroglio in mining Several heavy equipment owned by PT Berau Coal are conducting coal mining activities at the East Kalimantan mine operation Binungan site, in this file photo. (JP/Indra Harsaputra )

The government made a breakthrough in revising the problematic 2009 Mining Law, which the previous House of Representatives had tried to accomplish between 2015 and 2019, by stipulating the badly needed amendments in the omnibus bill on job creation.

Critics have said that the amendments to the 2009 Mining Law proposed in the omnibus bill are too much in favor of the interests of big coal companies, which have since early last year lobbied for a more liberal policy. However, we beg to differ.

First of all, we should realize the urgency to establish legal certainty for the seven major coal mining contracts that will end between 2020 and 2025, as they supply almost 70 percent of the coal needed by state electricity firm PLN and contributed the bulk of the US$24 billion worth of coal exports in 2018.

Until now, there has not been any regulatory framework for converting expiring contracts of work awarded under the old 1967 Mining Law into a licensing system. Since investment in mining is mostly long-term and highly risky, companies need to know the status of their concessions at least two or three years before the end of the contracts so that they can adequately prepare their investment decisions.

We agree that the mining licensing authority should be returned to the central government because many of the corruption cases involving regional government leaders were related to the reckless awarding of mining concessions.

We support the provisions that offer incentives, such as the exemption from royalty payment and the domestic market obligation, to mining firms that develop refineries, including coal gasification and coal-fired power generation. More downstream plants should indeed be developed in the mining industry to give the nation a higher value added from its natural resources.

We are against the revision of the 2009 Mining Law article that limits the concession area of a coal company at 15,000 hectares. Anyway, the first-generation mining contractors, which have operated for more than two decades, should have discovered the reserve concentration areas in their respective concessions currently ranging in size from 30,000 ha to 108,000 ha.

But the 2009 Mining Law provisions that give state mining companies priority to obtain expired coal mining concessions should be annulled because such preferential treatment could not guarantee better management of the concessions. We have had enough bad experiences with state-owned oil and gas holding company Pertamina, whereby the output of the oil concessions it took over declined due to low capital expenditure for development drilling.

It is most imperative to ensure that the licensing system is based on a fully transparent assessment mechanism and regards the high standards of the environmental and social sustainability of mines, notably the compulsory reclamation of mined areas.

It is also equally vital for the government to ensure a smooth transition from a contract of work to a special mining business license to prevent production disruption, in view of the big role of coal in exports, primary energy for PLN and state revenue.