An ongoing dispute between the central and local governments over the disbursement of authority to manage licenses for mining operations is unlikely to be resolved any time soon.

The country’s mining sector has been plagued by overlapping mining regulations and weak coordination between central and local authorities.

Indonesian Mining Association (IMA) executive director Priyo Pribadi Soemarno told The Jakarta Post that loose interpretation of the regulations hampered the sector and created problems for foreign investors.

“There is discontinuity between the implementation of the Law on Mining and the Law on Regional Autonomy… The sector has faced difficult times since the enactment of the autonomy law,” he said recently.

A law on the basic provision of mining, issued in 1967, stipulates that mining operation permits are managed by the central government via the Ministry of Energy and Mineral Resources.

However, a law on regional administration issued in 2004 gives greater authority to local administrations on landscape planning and environmental management.

British mining firm Archipelago Resources is the latest company to suffer. Its Toka Tindung gold mining project in North Sulawesi ran aground after the local authority refused to let the company operate, citing environmental concerns.

Archipelago Resources, through its subsidiaries PT Meares Soputan Mining (MSM) and PT Tambang Tondano Nusajaya (TNN), which is partly owned by the Tahija family, secured operation permits in 1986 and 1997 from the ministry’s directorate general of mineral resources to mine a 30,848-hectare concession in North Sulawesi.

The concession is estimated to contain gold sediment worth US$509 millions.

However, in 2005, with the introduction of its MSM and TNN units, the British company was forced to update its concession certificate by undergoing an environmental impact analysis.

Directly elected North Sulawesi Governor Sinyo Harry Sarundajang, however, in 2007 refused to update the certificate, arguing waste produced by the companies was damaging the environment and public health.

However, in March 2008, the Energy and Mineral Resources Ministry intervened, issuing a permit for the companies to start work again.

The ministry’s director general for coal, mineral resources and geothermal, Simon Sembiring, argued the permit was issued to ensure legal certainty for businesses in Indonesia.

“The regulation stipulates that if a body authorized to protect the environment fails to form a decision based on a project environmental analysis within 75 days, the project will automatically go ahead,” he said.

Simon also said a mining company forced to cease operations could file an arbitration against the government.

“Arbitration runs the risk that the government will pay all the bills the mining companies have run up in their operations here,” he said, adding that MSM and TTN had spent US$78.4 million and US$33.6 million, respectively, as of 2008 on their projects.

The People Alliance Against Mining Waste accused the ministry of negligence in issuing the permit, saying the Environment Ministry held sole authority to issue environmental impact recommendations.

The alliance said the mining construction projects were behind the recent flood in Toka Tindung area.

The IMA has repeatedly filed complaints on mining regulations and has urged the government and lawmakers to immediately conclude the amendment to the mining bill.

The bill, which would ensure legal certainty and resolve issues of overlapping authorities, has been in the hands of the lawmakers since 2006.

Priyo said other mining issues that needed resolution included concession ownership disputes involving mining companies that had received separate recommendations from the central and local governments.

“In some areas, local authorities carry out explorations in concessions already owned by other mining firms,” he said.

Current land ownership disputes involve state-owned PT Bukit Asam, state-owned PT Aneka Tambang, Canadian-based PT Inco and Anglo-Australian firm Rio Tinto, according to IMA.

“In 2006, IMA recorded there were $9 billion worth of investment commitments in the mining sectors,” Priyo said.

“But, until now, no significant realization has been seen. The companies only carry out small activities just to maintain their permits.

“They are merely biding their time, awaiting legal certainty.”

Posted in : Mining Companies, Mining Exploration, Mining Industry, Mining Investment, Mining Trade & Market