The Government through Ministry of Energy and Mineral Resources (“MEMR”) are continuously doing steps to regulate the licenses on mining sector of which area is still overlapping.
On 30 December 2015, the MEMR issued a new regulation related to the procedures of evaluation on mining business license (“IUP”) for mineral and coal, namely Regulation of Minister of Energy and Mineral Resources number 43 of 2015 on Procedures on Evaluation on Issuing Mining Business License for Mineral and Coal (“MEMR Regulation 43/2015”).
This new regulation was issued in order to discipline the IUPs which have been issued before the enactment of Law Number 4 of 2009 on Mineral and Coal Mining (“Mining Law”) or after the Mining Law is applicable.
Submission of Licensing Documents on Mineral and Coal
The submission of the licensing document conducted by regent/mayor in accordance with their jurisdiction based on the Law Number 23 of 2014 on Local Government (“Local Government Law”) is addressed to governor or the minister.
The submission is for foreign investment or domestic investment.
Under Article 5 paragraph (1) of MEMR Regulation 43/2015, it is explained that the evaluation of licensing document is carried out upon (i) IUP adjustment from Mining Rights (“KP”) and/or KP which is not expired but not yet adjusted to become IUP.
There are 5 criteria’s which will be the elements of evaluation; (i) administrative, (ii) geographic criteria, (iii) technical criteria, (iv) environment criteria and (v) financial criteria.
Evaluation Result of Administrative Criteria
If in administrative criteria it is found that:
a. Submission of application for renewal or upgrade of KP or IUP after expiry of KP or IUP;
b. Reserve area and application of KP is determined after the applicability of Mining Law;
c. Application of reserve area applied upon the Contract of Works (“CoW”), Coal Contract of Works (“CCW”), KP or IUP that are still active and having same commodity, then the Dirjen or governor may revoke the IUP.
Revocation of IUP is also made when in the administrative evaluation result it is found that exploitative KP does not derive from the upgrade of explorative KP. This provision is exempted for cooperative.
If in the evaluation there are more than 1 (one) IUP for business entity which is not public , then the Dirjen or governor shall:
a. Merge the Mining Business License Area (“WIUP”), if coincided, having similar commodities and similar stage of activities, and also issuing the new IUP according to the merged WIUP; or
b. Instructing the IUP holder to transfer the IUP to the new business entity, where the IUP holder has at least of 51% shares on this new business entity and issuing the new IUP on behalf of new business entity.
If the administrative evaluation result found that there is a period of time of the effectiveness of Explorative IUP that is exceeding the provision on the Mining Law, Dirjen or governor shall adjust the period within the provision under the Mining Law.
If the result of administrative evaluation found that there are period of Productive Operation IUP (“IUP OP”) exceeds the period of exploitative KP, Dirjen or governor shall adjust the period of IUP OP within the period of explorative KP.
Evaluation Result of Geographic Criteria – Overlapping WIUP
If there are overlapping area of WIUP with other similar commodities WIUP, Dirjen or governor shall :
a. Decrease WIUP, if a part of WIUP are overlapping; or
b. Implement of first request for reservation system that has fulfilled the requirement, shall get the first priority to be granted the IUP (fist come first served), if all the WIUP area are overlapping.
Nevertheless, by adhering to the principle of expediency, transparency, fairness and the interests of national and/or regional, Dirjen or the governor may carry out another settlement of the same overlapping WIUP commodities.
Where in the evaluation result shows that the overlapped WIUP with the State Reserve Area (“SRA”), then Dirjen or governor shall:
a. Decrease the WIUP which entered into SRA, if part of WIUP is overlapping; or
b. Revoke the IUP, if all of WIUP is overlapping with SRA.
Evaluation Result of Geographic Criteria – IUP Coordinate
If in the evaluation result it is found that the coordinate of explorative IUP is not in compliance to the coordinate of reserve area, Dirjen or governor shall:
a. Change coordinate contained in the amendment decision of issuing explorative IUP exploration, if WIUP exploration is on the reserve are; or
b. Revoke the explorative IUP exploration, if all coordinates are all outside the reserve area.
If in the evaluation result it is found that the IUP is not in line with latitude and longitude lines, Dirjen or governor shall change the coordinate to become in line with the latitude and longitude stipulated in the amendment of issuance IUP decision.
Evaluation Result of Technical, Environment and Financial Criteria
The technical criteria are:
a. Exploration report, for the explorative IUP holder which yet to enter feasibility studies stage; or
b. Exploration report and feasibility studies, for the explorative IUP holder has already entered the feasibility studies stage or IUP OP holder.
Environment criteria: environmental documents which has been legalized by authorized agency in accordance with the prevailing laws.
Financial criteria are:
a. Receipt of dead rents until last year delivery, for explorative IUP holder; or
b. Receipt of dead rents and production royalties until last year delivery, for the IUP OP holder.
Where all those criteria’s as above mentioned are not fulfilled by the exploration IUP holder, then Dirjen on behalf of Minister or governor shall impose the administrative sanction.
Administrative sanction as abovementioned can be in the form of: (i) warning letter; (ii) suspension of business activity; or (iii) revocation of IUP.
Where governor does not impose the administrative sanction by the revocation of IUP, Dirjen on behalf of Minister shall revoke the IUP which fail to meet the environmental criteria.
Announcement of IUP Clean and Clear Status (“CnC”) and Granting of CnC Certificate
Governor is obliged to submit the evaluation result on issuance of IUP to minister through Dirjen at the latest 90 calendar days since the minutes of handover licensing document from regents or mayor.
If the result cannot be submitted due to the (i) absence of governor; (ii) the authorized agent has not been determined; (iii) other legitimate reason, then the report of evaluation on issuance of IUP shall be submitted by provincial government officials in charge of energy and mineral resources.
Dirjen on behalf of minster announces the CnC status, according to the evaluation result of issuance of IUP related to the aspects as mentioned above.
Whereas, Dirjen announces the IUP with non CnC status, if the governor or other authorized legally agency have not submitted the evaluation result upon the issuance of IUP after the expiration of a period of 90 calendar days from the signing of the minutes of the handover licensing document.
The evaluation result upon the issuance of IUP also the recommendation of IUP CnC before this Regulation came into effect, shall remain valid and shall be submitted to the minister through Dirjen at the latest 90 calendar days since this Regulation come into effect.
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