12 Jul 2023
Indonesia Issues New Rules for Identifying and Designating Prospective Mining Areas

A. Introduction

On 5 May 2023, the Indonesian Government issued Regulation No. 25 of 2023 on Mining Areas (“GR 25/2023”)[1], which introduces a new regulatory framework for the identification and designation of mining areas.

A “Mining Area” is defined in GR 25/2023 as “an area that is designated in the national spatial plan as having mineral and/or coal resources, irrespective of government administrative boundaries.”

GR 25/2023, which has been issued following recent amendments to the Indonesian Mining Law[2] (specifically, those introduced by Law No. 3 of 2020[3]), revokes the old mining area regulatory framework set out in Government Regulation No. 20/2010.

B. Designation of Mining Areas

In accordance with the provisions of the amended Mining Law, GR 25/2023 stipulates that a Mining Area may only be designated as such by the Ministry of Energy and Mineral Resources (“MEMR”) after the completion of thorough survey and research to ascertain the extent of reserves and their potential within Indonesia’s Legal Mining Jurisdiction (Wilayah Hukum Pertambangan), which encompasses all the land, waters and subterranean territory of Indonesia as a single territorial unit, in other words, the entire Indonesian archipelago, and its underwater territory and continental shelf.

A Mining Area may be designated as such if it:

1. contains mineral and/or coal-bearing rock formations;
2. appears to possess mineral or coal deposits;
3. contains established mineral or coal resources ; and/or
4. has established mineral or coal reserves.

Upon designation of a Mining Area, it may be further subdivided into zones (“Mining Zones”):

1. Commercial Mining Zone: contains proven reserves, defined by geographic coordinates, and may further be divided into Commercial Mining License Areas for exploitation by the holders of Commercial Mining Licenses;
2. Public Mining Zone: specially designated for public mining activities involving local communities;
3. State Reserve Zone: an area set aside as a state reserve to accommodate national strategic interests; and/or
4. Special Commercial Mining Zone: where reserves and locations are known, and may be exploited commercially in the national strategic interest.

C. Designation of Mining Areas and Mining Zones

GR 25/2023 sets out detailed provisions for the designation of Mining Areas, and Mining Zones within a Mining Area. The key provisions in this regard are as follows:

1. Designation of Mining Areas

As elaborated above, the MEMR may only designate a Mining Area after a survey has been undertaken to ascertain the extent of reserves and their potential. The MEMR may assign this task to a state or regional research agency, which may work in cooperation with a domestic or overseas research institution.

Once a survey is completed and produces a positive outcome, the MEMR will prepare a Mining Area Plan in hardcopy or digital format. This forms the basis for the MEMR when designating a Mining Area. The MEMR will formally designate the boundaries of a Mining Area after they have been determined by the local provincial governor in consultation with the National Legislature (DPR) in Jakarta.

2. Designation of Commercial Mining Zones

An area within a Mining Area may only be designated as a Commercial Mining Zone if it:

1. contains carrier rock formations, supported by indicative, resource or reserve data on minerals or coal;
2. contains one or more type of minerals (including related minerals) or coal;
3. does not overlap with a Public Mining, State Reserve or Special Commercial Mining Zone;
4. is capable of supporting mining in a sustainable manner;
5. was subject to a former commercial mining license that expired or was revoked; and/or
6. forms part of a zone that is subject to a commercial mining license that has either been reduced in size, or surrendered back to the government.

Areas that fulfil the above criteria may be:

1. new sites identified after a survey to ascertain the extent of reserves and their potential;
2. areas where commercial mining operations have already been carried out by the holder of a commercial mining license or quarry license (surat izin penambangan batuan);
3. a former Commercial Mining Zone, which the MEMR determines should be re-established as such; and/or
4. a former contract of work / coal contract of work zone (area kontrak karya / area perjanjian karya pengusahaan pertambangan batubara), which the MEMR has determined should be designated as a Commercial Mining Zone.

Commercial Mining Zones may be further defined on the basis of the type of resources they contain and the parties that wish to exploit them.

In the event that other, different mining resources are discovered in a Commercial Mining Zone for which a license has been granted, and these new resources are not associated with the existing identified resources, the MEMR may issue a separate commercial mining license for the new resources.

No further details are available as to how this provision will operate in practice, particularly with regard to the relationships between the various parties that would end up operating in the original Commercial Mining Zone. It is expected that this and related issues will be dealt with by way of an MEMR regulation.

D. Changes Introduced by GR 25/2023

GR 25/2023 introduces several new mining provisions, highlighted in its elucidation, that were not contained in GR 20/2010:

1. Affirmation that survey and research in order to optimize the identification and inventorization of geological data and information, and mineral and coal potential, can be undertaken throughout Indonesia’s Legal Mining Jurisdiction. This may be carried out without the need for a permit or payment of fees to the government;
2. Affirmation that a former contract of work / coal contract of work zone (area kontrak karya / area perjanjian karya pengusahaan pertambangan batubara) may be re-established as a Commercial Mining Zone following MEMR evaluation.

E. ABNR Commentary

The new mining regulatory framework contained in GR 25/2023 aims to optimally realize the potential of non-renewable minerals and coal resources in a way that is transparent, sustainable and environmentally conscious.

It also addresses the long-standing confusion related to the overlapping of Mining Areas and licenses that arose during the period when the authority to issue mining licenses was vested in local government (prior to it being reclaimed by central government under the 2020 Mining Law) by affirming that two or more mining company can legally extract different mining commodities in the same area.

However, as mentioned earlier, a further implementing regulation will be required so as address the allocation and management of the rights and obligations of miners with licenses to separately extract different mining commodity in the same area.

In order to achieve the optimization of mining resources, as envisaged by GR 25/2023, effective implementation on the ground of the new regulatory framework will be crucial to ensure that the nation’s abundant coal and mineral resources are utilized in an environmentally sustainable way that provides maximum benefit to the Indonesian people.