Indonesia – Issuance of the long-awaited ordinance on the determination of mining areas

What you need to know

• The Indonesian government has introduced a new regime for mining areas (Wilayah Pertambangan – “WP”), with more extensive and detailed criteria (unlike the previous regime) for determining WP. This regulation also introduces several requirements and procedures for business entities interested in conducting inspection and survey activities related to a potential mining business area.
• In general, the Ministry of Energy and Mineral Resources (“MEMR”) will conduct the planning phases of WP, including inspection and survey activities. However, the MEMR can now appoint eligible SOEs (Badan Usaha Milik Negara – “BUMN”), regional ownership companies (Badan Usaha Milik Daerah – “BUMD”) and private business entities to conduct such inspection and investigation activities.
• The inclusion of private corporate entities during WP’s planning stages demonstrates the government’s long-term goal of encouraging greater investment in the mining industry. The extensive and detailed procedures set out regarding inspection and investigation activities will provide a gateway through which private business entities can be involved in Indonesia’s mining activities.

Background

On May 5, 2023, the Government of Indonesia issued a new Regulation on WP, namely Government Ordinance No. 25 of 2023 on Mining Area (“GR 25/2023“), which serves as one of several implementing provisions of Law No. 3 of 2020 on Mineral and Coal Mining (“Mining lawThe entry into force of GR 25/2023 will serve as an implementation of the government’s 2020 plan to issue three government executive orders for the Mining Act.

In general, GR 25/2023 defines WP as a part of the Mining Act Area (Wilayah Hukum Pertambangan – “WHP“), which is the basis for determining mining areas in Indonesia. This regulation replaces the previous regime, which is the Government Ordinance No. 22 of 2010 on the same subject (“GR 22/2010“).

Main provisions of GR 25/2023

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

Inspection and research for WHP

The planning process for WP is carried out by the MEMR. MEMR initially conducts an inspection and associated investigation to determine the applicability of GBW before mapping relevant WP areas.

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

MEMR and/or the designated research institutes must comply with specific notification obligations to the landowner(s) or relevant government agency before carrying out inspection and research activities.

Determination of WP

WHP effectively determined as WP by MEMR will be used by the Indonesian Spatial Planning Authority for the preparation of national spatial or other territorial plans.

Under the new regulation, the determination of WP can be changed once every 5 (five) years if certain requirements for new mining operations and/or changes in the use of the relevant WP result in the need to adjust the allocated mining areas. Such amendment will be proposed by the Governor and will be reviewed by the MEMR. Please note that any change will not affect the current permits issued on such WP.

Criteria for people’s mining area (Wilayah Pertambangan Rakyat – “WPR”) and National Reserve Area (Wilayah Pencadangan Negara – “WPN”)

WPR, being mining areas with a limited area designated for local mining; and WPN, being areas set aside for national strategic importance; are also covered by GR 25/2023 and are part of WP.

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

Information system

WP activities will be managed by MEMR through an electronic system to standardize a coordinate system, geospatial information and codification of various mining permits. Note that this system has in fact been used by the MEMR for several years.

Appointment of corporate entities to conduct inspection and survey activities towards mining permit area (Wilayah Izin Usaha Pertambangan – “WIUP”) and Special Mining Permit Area (Wilayah Izin Usaha Pertambangan Khusus – “WIUPK”)

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

This appointment can be granted for a maximum period of 3 (three) years and can be extended twice for 1 (one) year each time. Designated bodies are not allowed to transfer access and research rights to another person.

When conducting inspection and survey activities, the designated entities must obtain various approvals from: (i) the owner of the land, if the inspection and survey activities are conducted on privately owned land; (ii) the Ministry of Marine Affairs and Fisheries, if the inspection and research activities are carried out in an ocean area; and (iii) the Ministry of Forestry and Environment, if the inspection and survey activities are carried out in forest areas. In general, Designated Entities will be required to securely store confidential information obtained during the inspection and investigation process and to report such information to MEMR.

Priority and bid matching rights on WIUP and WIUPK Coal

The appointed entities that carry out inspection and investigation activities for WIUP are entitled to bid-matching rights over the allocation of any WIUP.

With respect to WIUPK coal, BUMN or BUMD have priority rights for the allocation of such resource. Private business entities will only receive bid matching rights on an auction, provided that BUMN or BUMD do not exercise their right of precedence throughout the process of awarding WIUPK.

Conclusion

GR 25/2023 clarifies the legal framework related to WP, by explicitly providing procedures related to inspection and investigation activities, in addition to criteria for determination for different WP.

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

Therefore, this regulation seems to effectively ameliorate the current confusion created due to historically limited information about the procedures governing the Indonesian mining law, as access to such information opens a path for opportunities for business entities to participate engage in mining activities, especially in the field of research and exploration of mineral deposits throughout Indonesia.