Seven Indonesian coal mining companies are facing legal uncertainty as deliberations on the amendment of the 2009 Mining Law were postponed, deterring them from adding investment on their assets.
The new amendment, which will lift the 15,000 hectare restriction on the size of coal miners' concessions when they are compelled to convert their expiring Coal Contracts of Work (CCoW) to new Special Business Licenses (IUPK).
The previous House of Representatives failed to complete the Mining Law amendment by the end of its term on September 30. Hence, there is currently no regulatory guidance whatsoever for contract extensions.
Given such an emergency, it is crucial that the newly installed House makes the bill on the 2009 Mining Law amendment a top priority in its National Legislation Program during its current session period, the Jakarta Post said.
"Stipulations in the current law that restrict the size of a coal concession to a maximum of 15,000 hectares should also be maintained because the size of coal mining concessions awarded before the 2009 law was unlimited. Some of the first generation coal mining contracts, which will end within the next two to three years, even cover hundreds of thousands of hectares," the newspaper said.
Coupled with ongoing global economic issues and the move away from coal to renewable energy sources, the lack of legal certainty has hard hit the industry, with companies finding it difficult to raise finance and interest potential investors.
Between now and 2025, seven other so-called "generation one" contracts are due to expire, including Kalimantan-based PT Arutmin and PT Kaltim Prima Coal, both of which fall under the umbrella of Bumi Resources, whose concessions are up in 2020 and 2021.
Between them, Kaltim Prime and Arutmin have a total concession area of 147,000 hectares across South and East Kalimantan, producing about 60 million tonnes of coal a year and with export markets across India, China and nine other Asian countries.
Other contracts due to run their course over the same period are PT Adaro Indonesia (2021), PT Kendilo Coal Indonesia (2021), PT Multi Harapan Utama (2022), PT Kindeco Jaya Agung (2023) and PT Berau Coal Tbk (2025), all owned by politically connected figures who stand to see their holdings diminished.
Mine owners don't want to be put in the same position as US mining giant Freeport, which was forced to relinquish a controlling interest in its profitable Grasberg copper and gold mine in Papua to state-owned holding company Inalum in exchange for a contract extension.
(Writing by Alex Guo Editing by Harry Huo)
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