Indonesia – Issuance of the long awaited regulation on mining area determination

What you need to know

• The Indonesian government has introduced a new regulation on mining areas (Wilayah Pertambangan– ”WP"), providing more extensive and detailed criteria (unlike the previous regime) for the determination of WP. This regulation also introduces various requirements and procedures for business entities interested in conducting inspection and research activities relating to a potential mining business area.
• Generally, the Ministry of Energy and Mineral Resources ("MEMR") will carry out the planning stages of WP, including inspection and research activities. However, the MEMR may now appoint eligible State-Owned Enterprises (Badan Usaha MilikNegara– "BUMN"), Regional-Owned Enterprises (奔波Usaha Milik Daerah– "BUMD") and private business entities to undertake such inspection and research activities.
• The inclusion of private business entities throughout the planning stages of WP demonstrates the government's long-term objective to encourage greater investments in the mining industry. The extensive and detailed procedures set out in relation to inspection and research activities will form a gateway allowing private business entities to be involved in Indonesia's mining business activities.

Background

2023年5月5日,印尼government enacted a new regulation on WP, namely the Government Regulation No. 25 of 2023 on Mining Area ("GR 25/2023"), which serves as one of various implementing regulations of the Law No. 3 of 2020 on Mineral and Coal Mining ("Mining Law"). The enactment of GR 25/2023 will serve as an execution of the government's 2020 plan to issue three implementing government regulations for the Mining Law.

Generally, GR 25/2023 defines WP as a part of the Mining Law Area (Wilayah Hukum Pertambangan– "WHP"), which constitutes the basis for determining mining areas in Indonesia. This regulation replaces the previous regime i.e. the Government Regulation No. 22 of 2010 on the same subject ("GR 22/2010").

Key provisions of GR 25/2023

The key provisions of GR 25/2023 are as follows:

Inspection and Research for WHP

WP的规划过程将由the MEMR. Initially, MEMR conduct an inspection and associated research in order to determine the applicability of WHP before mapping relevant WP areas.

National and/or regional research institutes appointed by MEMR now have the opportunity to collaborate with any universities to support WHP inspection and research activities.

MEMR and/or the appointed research institutes must adhere to specific notification obligations to the land owner(s) or relevant government institution before conducting inspection and research activities.

Determination of WP

WHP that are effectively determined as WP by MEMR will be utilized by the Indonesian spatial planning authority for the preparation of national spatial or other territorial plans.

Under the new regulation, determination of WP may be changed once every 5 (five) years where certain requirements on new mining business activities and/or changes in the use of the relevant WP result in the need to modify the allocated mining areas. Such a modification is to be proposed by the governor, and will be evaluated by the MEMR. Note that a modification will not affect current permits that have been granted on such WP.

Criteria for People's Mining Area (Wilayah Pertambangan Rakyat– "WPR") and National Reserves Area (Wilayah Pencadangan Negara– "WPN")

WPR, being mining areas that have limited area designated for local mining; and WPN, being areas that are reserved for national strategic interest; are also regulated under GR 25/2023 and constitute part of WP.

The new regulation sets out updated criteria for a WP to be considered as WPR and WPN. In terms of WPR, these criteria include having secondary mineral reserves within river and river banks that are located within at least 100 hectares of the WP. As for WPN, the area must be intended for conservation purposes for mineral and coal.

Information System

WPactivities will be managed by MEMR through an electronic-based system in order to standardize a coordinate system, geospatial information and codification of various mining permits. Note that this system has in fact already been implemented by the MEMR for several years.

Appointment of business entities to carry out inspection and research activities towards Mining Business Permit Area (Wilayah Izin Usaha Pertambangan– "WIUP") and Special Mining Business Permit Area (Wilayah Izin Usaha Pertambangan Khusus- "WIUPK")

GR 25/2023 allows MEMR to appoint inspection and research activities towards WIUP and WIUPK not only to research institutes, but also to BUMN, BUMD and private business entities, which have met certain administrative, technical and financial requirements under the GR 25/2023.

This appointment may be granted for a maximum period of 3 (three) years and can be extended twice for 1 (one) year each. Appointed entities are not permitted to assign inspection and research rights to another party.

While conducting inspection and research activities, the appointed entities must obtain several approvals from: (i) the owner of the land, if the inspection and research activities are being conducted on a privately-owned land; (ii) the Ministry of Marine Affairs and Fisheries, if the inspection and research activities are being conducted in ocean territory; and (iii) the Ministry of Forestry and Environment, if the inspection and research activities are being conducted in forest area. Generally, appointed entities will be required to securely store confidential data obtained throughout the inspection and research process, and report such information to MEMR.

Priority rights and bid-matching rights over WIUP and WIUPK Coal

The appointed entities performing inspection and research activities for WIUP are entitled to bid-matching rights over the allocation of any WIUP.

In respect of WIUPK coal, BUMN or BUMD will hold priority rights for the allocation of such resource. Private business entities will only receive bid-matching rights at auction provided that BUMN or BUMD does not exercise their priority right to priority throughout the process of granting WIUPK.

Conclusion

GR 25/2023 clarifies the legal framework in respect of WP, explicitly providing procedures pertaining to inspection and research activities, in addition to criteria for determination for various WP.

Further, this regulation extensively regulates the involvement of BUMN, BUMD, and private business entities during inspection and research activities that determine WIUP or WIUPK.

Therefore, this regulation appears to effectively ameliorate current confusion arising due to historically limited information as to the procedures governing Indonesian Mining Law, as with access to such information opening a pathway of opportunities for business entities to engage in mining business activities, particularly in the field of research and exploration of mineral deposits throughout Indonesia.

Authors:Ratih Nawangsari, Partner; Adhika Aditya, Senior Associate; Indra Sudrajat, Associate; Sebastian Sormin, Intern; and Nathan Notley, Intern.