13 Dec 2023
New Indonesian Regulation Streamlines Mining Plan Rules But Imposes Tough New Sanction for Non-Compliance

A. Introduction

On 11 September 2023, the Ministry of Energy and Mineral Resources (“MEMR”) issued Regulation No. 10 of 2023 (“Reg. 10”)[1], which establishes new rules that govern the submission, approval and amendment of mining and budget plans (Rencana Kerja dan Anggaran Biaya / “RKAB”) by mineral and coal mining businesses.

An RKAB is a document that must be prepared by a mineral or coal mining undertaking and submitted to the MEMR for approval. It generally sets out information on the business, technical and environmental aspects and plans of an undertaking’s mining-related operations. Without an approved RKAB, it is unlawful to engage in mining-related operations.

Reg. 10 introduces several key changes to the existing RKAP regime by revoking and replacing the relevant provisions of the earlier regulations on the issue (“Previous Regulations”),[2] which otherwise remain in effect.

B. Key Changes

Both Reg. 10 and the Previous Regulations require the holder of any of the various types of mining business licenses (Izin Usaha Pertambangan / “IUP”) to submit an RKAB to the MEMR for approval. Among the key changes introduced by Reg. 10 in relation to RKAB are:

1. Period of Effectiveness of RKAB

Importantly, Reg. 10 changes the period of effectiveness of an RKAB. Under the Previous Regulations, an RKAB was effective for only one year. However, under Reg. 10, the effectiveness of an RKAB depends on the operational stage reached by the mining business concerned. During the exploration stage, the period of effectiveness of an RKAB continues to be 1 year. However, during the operational production stage, the RKAB will be effective for 3 years. Should the relevant IUP be valid for less than 3 years, the effectiveness period of the RKAB will be adjusted accordingly.

2. Authority of MEMR to approve RKAB
   
   Reg. 10 revokes the authority of MEMR to approve an RKAB for processing and refining operations that are not integral to mining operations. Following the enactment of Law No. 3 of 2020 on the Amendment of Law No. 4 of 2009 on Mineral and Coal Mining, these activities now fall within the authority of the Ministry of Industry.
    
3. RKAB Submission and Approval Procedures
   
   Submission
   
   Reg. 10 requires that an RKAB be submitted online by the IUP holder to the MEMR or local governor (as appropriate) in accordance with the following timeline:
   
   a. For the undertaking’s first RKAB, 30 calendar days after issuance of its IUP (applies to both the exploration and operational production stages);
   b. For subsequent RKABs:
      (i). at the exploration stage: between 90 and 45 calendar days before expiry of the current RKAB;
     (ii). at the operational production stage: after submission of the second quarterly report but at least 45 calendar days before expiry of the current RKAB.

Approval

The MEMR or the local governor (as appropriate) will either approve or reject an RKAB within 30 days of its submission. Should an RKAB be rejected, the applicant will have one opportunity to revise and resubmit the RKAB application. If the RKAB is still not acceptable to the MEMR,  the applicant will have to wait until the following year before submitting further revisions to their proposed RKAB.

IUP holders must operate in accordance with their approved RKABs. Without an approved RKAB, an IUP holder is prohibited from engaging in mining (as discussed further in section D below.)

4. Sanctions
   
   As with the Previous Regulations, Reg. 10 stipulates that failure to comply with RKAB obligations is subject to the following sanctions:

1. Written warnings (up to 3), each valid for 30 days;
2. Temporary suspension of business operations, to be imposed 60 days after expiry of the last written warning;
3. Revocation of business license following the expiry of a temporary suspension where corrective action has not been taken by the IUP holder.

In addition to the above, Reg. 10 introduces new provisions that authorize the MEMR or local governor (as appropriate) to directly  suspend business operations without prior warning  in a situation where (i) an IUP holder engages in mining operations before its RKAB has been approved; or (ii) fails to submit an RKAB  for approval for two consecutive years.

C. Amendment of RKAB

An IUP holder may apply once to amend their RKAB per calendar year. An application may only be submitted after the IUP holder has filed their first quarterly report, but no later than July 31 in the applicable calendar year.

Notwithstanding the above, an IUP holder will be permitted to amend their RKAB more than once per calendar year in the following circumstances:

a.occurrence of a force majeure event;
b.occurrence of obstructive circumstances;
c. environmental conditions no longer able to support production operations;
d. a change in national government policy on minerals or coal;
e.insufficient national mineral or coal production; and/or
f. non-compliance with national domestic market obligations for minerals or coal.

(note: conditions a, b, c were provided for under the Previous Regulations, while d, e, and f are new)

The MEMR or local governor (as appropriate) should approve or reject an amendment application within 30 days after a submission is complete.
 

D. Prohibitions

Reg. 10 provides that an IUP holder is prohibited from engaging in commercial mining operations if:

a. it fails to submit an RKAB;
b. its RKAB has not been approved by the competent authority;
c. its RKAB has been rejected by the competent authority;
d. there has been a change of mining services provider and such change has yet to be reflected through revision of the RKAB.
 

E. ABNR Commentary

Reg. 10 aims to streamline the process of RKAB submission, approval and amendment, while imposing a tough new sanction on mining companies that fail to comply with RKAB requirements, i.e., the possibility of a no-warning suspension of their mining operations.

On the plus side for miners, the extension of the RKAB validity period from one year to three during the operational production stage has been welcomed by the industry as it will provide miners with greater certainty, given that they can now plan their production for three years ahead rather than just one, as was the case previously. This greater certainty is particularly important where long-term supply contracts are involved.

Given the importance of RKAB obligations and the sanctions that may be imposed for non-compliance, we would urge all mining businesses to urgently familiarize themselves with their obligations under Reg. 10.

As a leading Indonesian law firm for mining and resources law, ABNR is ideally placed to advise you on what you need to do to comply with these obligations. Should you require further information, please do not hesitate to contact partner Mr. Ayik C. Gunadi (agunadi@abnrlaw.com), senior associate Mr. Mahatma Hadhi (mhadhi@abnrlaw.com) or associate Mr. Kenny Poltak (kadrianus@abnrlaw.com).