Draft Guidelines for Licensing of Metal Mineral and Coal Business Activities Regulation

• Author: William A. Sullivan/Christian Teo Purwono & Partners
• Profession: Licensed Foreign Advocate in Indonesia as well as a Solicitor of the Supreme Court of New South Wales
• Pages: 267-322

CHAPTER 22

Draft Guidelines for Licensing of

Metal Mineral and Coal Business

Activities Regulation

I. Executive Summary

1. Overview

1.1 An advanced draft of the Guidelines for Licensing of Metal Mineral

and Coal Business Activities Regulation (hereinafter referred to as

“Draft MM&C Licensing Regulation”) has been circulated by way

of the intended eventual implementation of Articles 19, 27(2), 44(5),

61, 68, and 111 of GR 23/2010.

1.2 At this time, it is not possible to say when the Draft MM&C Licensing

Regulation will be finalized and issued.

2. Approach

2.1 License Areas: Mining Business License Areas (“WIUPs”or

“WIUPKs”) are granted through a public tender process.

2.2 WIUPs and WIUPKs are to be determined by the MoEMR.

2.3 Tender Process: The public tender process consists of two stages

being (i) the prequalification stage and (ii) the qualification stage.

2.4 There are substantial administrative, technical, environmental, and

financial requirements for would-be participants in public tenders for

WIUPs and WIUPKs in respect of metal minerals and coal.

2.5 Public tenders for WIUPs are carried out by the Relevant Govern-

ment Authority depending upon the location of the WIUP while

public tenders for WIUPKs are carried out by MoEMR.

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2.6 The permitted participants in WIUP tenders are Business Entities,

cooperatives, and individuals, while the permitted participants in

WIUPK tenders are BUMNs, BUMDs, and BUMSs.

2.7 BUMNs and BUMDs have priority in tenders for WIUPKs. If no

BUMN or BUMD expresses interest in a WIUPK within seven

working days of the WIUPK tender being announced, the WIUPK

will be tendered to BUMSs.

2.8 The tender winners of WIUPs/WIUPKs must submit applications for

metal minerals or coal IUPs/IUPKs to the Relevant Government

Authority based on the location of the relevant WIUP/WIUPK. The

Relevant Government Authority will issue the IUP/IUPK after

the applicant has fulfilled various requirements.

2.9 Obligations and Rights of IUP Holders: Production Operation

IUP/IUPK holders have the right to transport mineral products from

the mining location to the processing location, to the harbor, and

elsewhere for delivery to buyers of the mineral products.

2.10 If other nonassociated mineral products are subsequently discovered

in metal mineral or coal WIUPs/WIUPKs, the relevant IUP/IUPK

holders have a priority right to obtain IUPs/IUPKs for those nonas-

sociated mineral products and without going through a public tender.

2.11 Expiry and Extension of IUPs: Metal mineral and coal IUPs/

IUPKs come to an end if they (i) are returned by the IUP/IUPK

holders to the Relevant Government Authority, (ii) are revoked or

cancelled by the Relevant Government Authority due to regulatory

violations by the holders, or (iii) expire.

2.12 Production Operation IUPs/IUPKs for metal minerals and coal may

be extended two times for a maximum period of ten years each, after

fulfilling certain requirements.

3. Sanctions

The Relevant Government Authority is entitled to impose administrative

sanctions on metal mineral and coal IUP/IUPK holders which (i) carry out

activities that are not in line with their IUPs/IUPKs, (ii) fail to submit the

required quarterly and/or annual reports, (iii) fail to fulfill the obligations as

set out in GR 28/2009, and/or (iv) give false information or submit forged

documents to the Relevant Government Authority.

4. Transition

Exploration IUP/IUPK holders that have not deposited the Guarantee of

Seriousness before the MM&C Licensing Regulation is issued must deposit the

Guarantee of Seriousness in accordance with the provisions of and not later

than three months after the date the MM&C Licensing Regulation is

finally issued.

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5. Assessment

5.1 On November 22, 2012, the Constitutional Court ruled that it was

actually the Regional Governments, rather than the Central Govern-

ment (i.e., MoEMR), that had the authority to initially determine WUPs

and WIUPs and that the role of the Regional Governments was not

properly to be limited to co-ordination or “consultation”with the

Central Government (“November 22 SC Decision”).

5.2 The Central Government has subsequently given a very narrow

interpretation to the November 22 SC Decision, which narrow inter-

pretation still leaves the Central Government free, as part of a further

“verification”process, to adjust or change WUPs and WIUPs that have

been previously determined by the Regional Governments and if the

Central Government does not agree that the determinations made by

the Regional Government are “suitable.”

II. Details of Main Provisions

1. Tender for Mining Business License and Special Mining Business License

Areas

Relevant

Article Details

Articles 2–11 1.1 Tender Preparation

A. Metal mineral and coal mining activities may only be

conducted in Mining Business License Areas or “WIUPs”

and Special Mining Business License Areas or “WIUPKs”

as part of Mining Business Areas or “WUPs”and Special

Mining Business Areas or “WUPKs”consisting of:

a. Exploration WIUPs/WIUPKs; and

b. Production Operation WIUPs/WIUPKs.

B. WIUPs/WIUPKs are to be determined by MoEMR fol-

lowing coordination with the relevant Governors and

Regents/Mayors.

C. WIUPs/WIUPKs will be determined by MoEMR based on

the classification of complete and accurategeological data,

general surveys, exploration, and mineral and coal poten-

tial conditions in order to set the information data com-

pensation price or the total investment replacement cost.

D. The information data compensation price or the total

investment replacement cost, as referred to in 1.1C

above, is the minimum tender price for WIUPs/WIUPKs.

(Continued)

Draft Guidelines for Licensing of Metal Mineral and Coal Business Activities Regulation 269