Law Destroyed in the House
Ratification of the revised Mineral and Coal Mining Law draws criticism, with many accusing it of only benefitting mining corporations. A leaked letter from the Energy Commission points out that the deliberations should not continue.
THE condolences wreaths lined up in front of the main parliamentary building in Jalan Gatot Subroto in Jakarta on Tuesday, May 12. The senders ranged from student associations grouped in Mahasiswa Bersama Rakyat (Students with the People), to ocean and fisheries activists called the Bahari/Kiara Community.
On noon that day, a plenary meeting was on the way at the House of Representatives (DPR). Several days prior to that, rumors spread that the meeting would give its approval stamp on the revision of Law No. 4/2009 on mineral and coal mining (Minerba).
That afternoon, right before breaking of the fast, DPR Speaker Puan Maharani confirmed the rumors. “Eight factions aye, one faction against, are there any changes? Can we agree upon (this), can the viewpoint of the mini faction be the basis of the agreement? All agreed?” Puan said, welcomed by dozens of parliamentarians who were present.
Of the 296 members, 255 were virtually ‘present’. From the viewpoint of the mini faction, only that of the Democrat Party rejected the ratification, saying that further discussions were needed for the Mining Law.
Outside of the plenary meeting, environmental and pro-democracy activists voiced their protests. Since it was back on the negotiating table on February 13—marked by the formation of a working committee to look into the problem inventory list—the discussions on this draft law has been viewed as murky. Due to the Covid-19 pandemic, meetings between the working committee and government representatives have been done online. “Discussions are done without public participation and transparent information,” said Dwi Sawung, national executive member of the Indonesian Forum for Environment (Walhi).
Commission VII’s letter to DPR leaders and the Legislation Body on the Mining Bill, last January./ dok.PT Rekind
The mining draft law is one of several that has sparked mass criticism since September 2019. At that time, a wave of demonstrations with the hashtag #ReformasiDikorupsi (corrupted reform) broke out in a number of regions after the government and the DPR sped up discussions on an anti-corruption draft law believed to weaken the Corruption Eradication Commission (KPK).
Meanwhile, the mining draft law has a separate history. Since the beginning, many view that the changes in the law would only favor the few corporate coalmining giants in possession of the Work Contract of Coal Mining Business (PKP2B). These suspicions derive from the fact that the bill contained draft government regulations (RPP) that would free PKP2B contractors from a number of requirements stipulated in Law No. 4/2009 on mineral and coal mining.
The RPP, prepared during the time of Energy and Mineral Resources Minister Ignasius Jonan, was not issued after the KPK sent a letter to President Joko Widodo in late May 2019 regarding the RPP, which they deemed to be against the law. However, towards the end of President Jokowi’s first term in 2019, the government and the DPR scheduled discussions on draft laws. Amidst intense public protests, in September 2019 Jokowi decided to postpone the discussions.
However, another shock landed in January. Jokowi’s newly-formed cabinet again scheduled discussions for the draft Mining Law by entering it into the 2020 National Legislation Program. The DPR’s decision early this year is seen as proof that discussions on this law revision has been problematic.
A number of civil groups and mining observers are currently planning to use the above as one of the propositions to take the new mining law to court. “As law-abiding citizens, we will take legal steps to the Constitutional Court,” said Simon Sembiring, the energy and mineral resources ministry’s director-general for minerals and coal from 2003 to 2008.
•••
THE letter signed by Commission VII Chairman Sugeng Suparwoto to DPR leaders was leaked. In this letter dated January 20, Sugeng said that according to Law No. 15/2019 on the formation of law regulations, plans for the mining law revision could not be done as a carry over at the current DPR period. This is because in the House 2014-2019 period had not discussed the draft law’s problem inventory list.
In the letter, DPR’s Commission VII said it needed to review, adjust the substance, and even rearrange the mining bill. At the same time, the government was pushing forward the omnibus bill on job creation, which also regulates permits and management for mining.
This is why DPR members who overlook energy and mining issues had asked the legislation body not to include it in the carry over National Legislation Program. However, two days later, it appeared that the letter was of no use. The DPR plenary session on January 22 decided that the Mining Law Bill would be included in the 2020 National Legislation Program.
Asked for confirmation about the letter, Commission VII Deputy Chairman Bambang Wuryanto remained vague. “As a leader, I don’t believe I issued it. Please ask the Commission chairman,” Bambang said on May 12. This secretary of the leading Indonesian Democratic Party of Struggle (PDI-P) Faction underlined that the problem had been conveyed to the DPR’s Legislation Body. “If there are any procedural mistakes, then go to the Constitutional Court.”
Meanwhile, Sugeng said that DPR leaders have responded to the letter by organizing a consultative body (Badan Musyawarah) meeting. All DPR leaders and other House bodies were present at the meeting organized one day prior to the stipulation of the 2020 National Legislation Program.
At the meeting, Sugeng said he had conveyed his worries that the mining bill carry over would wipe out the constitutional rights of the new DPR members. This is because the problems’ inventory list (DIM) was compiled by Commission VII of the previous period. “However, the Baleg (legislation body) chairman said this carry over was done because the requirements or the administrative and substantive materials (in the form of the president’s letter and the DIM) are available,” Sugeng said on May 15. Therefore, he continued, “the letter from Commission VII has received an explanation, and is thus resolved.”
Once it was included in the 2020 National Legislation Program, intense discussions commenced on the Mining Bill. In late January Commission VII formed a Mining Bill working committee involving 26 Commission members, and 60 representatives from a number of ministries. Several focus group discussions were carried out, so that the working committee could start discussing the DIM in February.
Until late March, the committee managed to go through 938 points in the DIM, and was ready to take them to a first level meeting. The plan was that the Commission VII plenary meeting to decide on the matter would fall on April 8. However, Energy and Mineral Resources Minister Arifin Tasrif asked for a postponement as the government was focusing on handling the Covid-19 outbreak.
In the midst of the discussion, the Democrat Party Faction withdrew. Democrat Party Faction Secretary Teuku Riefky Harsya said his faction took a step back from three working committees: the Job Creation Bill, the Mining Bill, and the Pancasila Ideology Direction Bill. This decision was made based on several considerations, including public aspirations received by the parties, particularly regarding discussions on the bill in the midst of the pandemic. “It is very important that public involvement usually present in bill discussions is still represented to guard the checks and balances process,” Teuku Riefky Harsya said on April 22.
The Democrat Party Faction gave the same reasons in the first level meeting of Commission VII, which was finally held on May 11. The faction’s viewpoint, read out by Sartono Hutomo, is that the party does not want the handling of Covid-19 obstructed because bureaucrats at ministries are busy conducting meetings on bills which could still be postponed.
Aryanto Nugroho, researcher at Publish What You Pay Indonesia, said that the leaked Commission VII letter from January supports suspicions that discussions on the draft law has been problematic since the start. “Why would the Mining Bill suddenly be included in the 2020 National Legislation Program in the plenary meeting on January 22?” asked a suspicious Aryanto.
•••
ASIDE from odd discussion formalities, several chapters in the revision of the Mining Bill approved by the DPR on May 12 has rubbed many the wrong way. Former Environment Minister Sonny Keraf, who also led the working committee to formulate Law No. 4/2009, said he has grave concerns about the new law. This is because a number of good and relevant provisions in the old law were not included in the new one.
Sonny gave the example of down streaming mining products. He pointed out that mineral processing and refining activities should be done until the end product. “Not only 75 percent, which would not be optimum,” he said on May 15.
He also pointed to the area and concession time limitations. In the old law, this regulation was included so as to prevent the formation of monopolies or oligopolies. The limitations in that law allowed opportunities for many businesses. This is why he refutes that the old law does not consider investment interests. Limits for exploration concession and mining production were set up with economics in mind. “I fully understand the spirit and big thoughts behind Law No. 4/2009,” Sonny said.
In the old Mining Law, the special permit for mining business (IUPK) for metal mineral exploration was capped at 100,000 hectares. Once in production, the area is limited to 25,000 hectares. Restrictions also apply to coal mines: 50,000 hectares for exploration and 15,000 hectares for production.
The new law, meanwhile, has changed these stipulations set in Article 83. While restrictions for exploration activities remain, there are no limits for production. Areal permits for the latter are set based on evaluations by the minister for energy and mineral resources on development plans proposed by permit holders. This scheme is similar to government’s mining regulation draft supported by the energy ministry in the previous cabinet.
Inevitably, some parties are convinced that these changes only favor PKP2B permit holders, particularly those whose contracts are ending and need to extend them. With the new law, mining companies which control tens of thousands of hectares do not need to cut their concession area, as they would have had to do under the old law.
At least seven first-generation PKP2B permit holders will have their contracts end in the next five years. The contract of Arutmin Indonesia, which controls an area of 57,107 hectares, will end in November 1. Kendilo Coal Indonesia’s contract, with the smallest working area of 1,869 hectares, will end on September 13, 2021.
Kaltim Prima Coal, with an area of 84,938 hectares, has a contract ending on December 31, 2021. Then there is Multi Harapan Utama (39,972 hectares) with a contract ending on April 1, 2022; Adaro Indonesia (31,380 hectares ) on October 1, 2022; Kideco Jaya Agung (47,500 hectares) on March 13, 2023; and Berau Coal (108,009 hectares) on April 26, 2025.
Simon Sembiring is also disappointed because the new law does not differentiate among the three kinds of PKP2B permits, which are generation I, II, and III. “Meanwhile, the three differ from each other,” Simon said on May 13.
He explained that each permit is based on different considerations. The generation I PKP2B permit is based on Presidential Decree No. 49/1981, which says that cooperation exists between state coal mining companies and private contractors. Based on Article 5 of the decree, the coal mine contractor’s goods and assets would become the state company’s property. When the contract changes, the role of the state-owned company would be taken over by the government. “This means that goods and assets would have to go to the state after the contract ends,” Simon said.
Then, if a party—a new one or one that wants a contract extension—wants to take on the enterprise, it must apply and give compensation to the state for the assets it is about to use. “This is very clear in the contract,” said Simon, who represented the state during the formulation of the Mining Bill between 2005 and 2009.
This means, he continued, that the assets must be assessed according to the mine’s operations. The government could ask an independent consultant to calculate this. The result would then become the basis for the corporation which would continue the business. “The question is, has this assessment been carried out?” asked Simon.
These requirements differ from that of PKP2B’s generation II, which is based on Presidential Decree No. 21/1993, and generation III, which based on Presidential Decree No. 75/1996. In those two contracts, goods and assets become the property of the company or contractor after the agreement ends.
The new law gives a guarantee for a concession extension. In Article 169A, it says that working contracts and the PKP2B are given guarantees to be extended into Special Mining Business Licenses (IUPKs) to continue with operations. Contracts that have not yet been extended are given assurances for two extensions in the form of an IUPK, each for 10 years.
Simon lamented that the state bestows these guarantees. “This is pawning the country’s sovereignty,” he said. He believes that contracts and agreements can be extended by submitting an application to the government. The government can then conduct an evaluation, and either accept or reject the request. In the evaluation process, there is room for negotiating for the greatest good for the people. “Meanwhile, giving this guarantee hands over too much power to the energy minister.”
Regional Representatives Council (DPD) also question this concession extension guarantee. In a meeting with DPR’s Commission VII working committee on April 27, Bustami Zainudin, deputy chairman for DPD’s Committee II, said that the DPD disagrees on a number of articles, particularly those that automatically allow contract extensions. “When a contract has ended, the mining area must be returned to the state, and put up for auction after that,” Bustami said regarding the input from DPD’s Committee II, which deals with natural resources issues.
Irwandy Arif, special staff member for the energy minister, assures that extensions for contracts and agreements do not happen automatically, but instead need to fulfill requirements and go through state evaluations. “There are requirements to improve state income and value added,” he said. The same goes for the breadth of the working area, which is set based on the approval of the energy minister.
PKP2B contractors are clearly happy with the new law. Ezra Sibarani, legal and external affairs manager of Arutmin Indonesia, said that the revised Mining Law confirmed the right to extend PKP2B permits. “This ratification gives investment assurance not only in direct mining operations, but also in exploitation and value-added improvements,” he told Tempo on May 13. Arutmin applied for an extension since the end of last year. Currently the application is still under evaluation by the energy ministry.
Adaro Energy CEO Garibaldi Thohir said his company is asking for an extension, regardless of whether the law was ratified or not. The plan is to file an application for extension in early 2021 for a contract that will end in late 2022. “We have an agreement that has binding legal force,” said Garibaldi, who is an older brother of State-Owned Enterprises Minister Erick Thohir.