Mining in protected forests - government gives way to mining industry pressure

Down to Earth No. 61, May 2004

The government of President Megawati has caved in to pressure from international mining companies to allow open-pit mining in protected forests, paving the way for yet more forest destruction and marginalisation of forest-dependent communities.

The go-ahead for mining in protected forests came on March 11, with a new Government Regulation in Lieu of Law (Perpu) No. 1/2004 on Changes to Law No. 41 of 1999 on Forestry. The regulation adds two extra paragraphs (83A and 83B) to the 1999 law. The first states that 'all permits or contracts related to mining in forest areas which were in existence before Forestry Law (No.41, 1999) are confirmed to remain valid until the intended end of the permit or contract.' The second says that further implementation of this will be determined by Presidential Decree.

The government has also stated that the President will issue a decree allowing thirteen companies to resume mining operations. According to co-ordinating minister for economics Dorodjatun Kuntara-Jakti, this is because these companies "have proven reserves that are economically viable." These include highly controversial projects such as Freeport McMoRan's gold and copper mining operation and BHP-Billiton's nickel mining venture on Gag Island, both in West Papua, and Newcrest's gold mining operation in North Maluku which saw the fatal shooting of a protester in January this year (see DTE 60). However, it seems a further nine companies will not be permitted to continue, because no viable reserves have been found in their concessions (see box for full list).

According to environment minister Nabiel Makarim, the thirteen companies will be the last permitted to mine in protected areas - no more permits will be issued. Shortly after the Perpu was announced, Makarim argued that the government had no choice but issue the decree. If it had refused to allow these 13 companies to proceed, the government would have had to pay unaffordable amounts of compensation. A figure of up to US$31.5 billion in compensation for breach of contracts has been cited.

Since the Perpu stipulates that all contracts preceding the 1999 forestry law should continue as intended, and the decision on which is subject to presidential decree, it cannot be ruled out that more than 13 concessions will be reopened. Altogether, 150 concessions are affected by the law. Since 1999, foreign companies - in some cases assisted by their governments - have been lobbying to get the law changed in their favour. A variable list of 22 companies has received priority treatment in the government's deliberations but, until now, the final decision has rested with the national parliament.

The Perpu, which came into force immediately, still needs parliamentary approval if it is not to lapse. Deputy Secretary of State for legal affairs Lambock V. Nahattands said the regulation would be submitted to parliament as a bill. According to one legislator, the parliament is unlikely to give its approval, because investigations, as required by House Commission VIII for Environmental Affairs, have not yet been completed. By issuing a Perpu Megawati's cabinet has bypassed the lengthy parliamentary deliberation of the mining in forests issue. The government is believed to have opted for the Perpu route, in order to push ahead with some kind of assurance to the mining industry before the presidential elections.

The forestry ministry, which has tried to stop mining in protected forests, has said it cannot oppose the Perpu. However, ministry spokesman Bambang Soepijanto told the Jakarta Post he hoped that parliament would reject the regulation in response to the public outcry and media reports about the losses the country could suffer as a result. He urged forestry experts and NGOs to release findings that could help persuade members of parliament.

The industry has welcomed the announcement, but is calling for more clarity and more certainty, citing the fact that there has been no new mining exploration since 1999 and closure of older mines as reasons to boost investment to the maximum. The Indonesian Mining Association has urged the government to issue a presidential decree allowing mining in protected forests to back up the Perpu. The IMA's executive director, Paul Coutrier, said that it was the government's rightful decision to select companies, but warned that companies not permitted to resume operations may sue the government as they had strong grounds to do so.

PT Inco Indonesia, subsidiary of the Canadian mining giant Inco, has already said it plans to file a lawsuit with an arbitration court over Jakarta's decision to annul its contract. Almost half (47%) of the company's concession lies in a protected forest area, according to JATAM. Recently, the company's operations have become more militarised with the presence of military and Brimob special forces police. (For background see DTE 36:13, DTE's reports on Inco at dte.gn.apc.org/camp.htm#Inco and www.jatam.org for more recent information.)

No 'compelling emergency'

Indonesian civil society organisations, grouped under the Coalition Against Mining in Protected Forests, are accusing Megawati of hypocrisy. They say she has "no commitment to the critical condition of forests in Indonesia, which are on the verge of destruction," and that it is a "reflection of the weakness of the Megawati government to withstand pressure from investors and foreign governments such as Australia which push for mining in protected forests". Last year it was revealed that Australian embassy officials had, on at least nine occasions, lobbied Jakarta to allow mining in protected forests to be permitted (see DTE 58).

The Coalition also accused the Megawati government of violating the Constitution, which says that a Perpu may only be issued "in the event of a compelling emergency". (Two controversial Perpu on anti-terrorism were issued in the wake of the October 2002 Bali bombings.) The NGOs also argue that the content of the Perpu is flawed, and therefore does not actually lift the ban on open-pit mining in protected forests.

In a statement, the Coalition called on members of parliament not to approve the regulation and urged the Megawati government to withdraw it. The group also called for the law enforcement authorities to immediately take legal action against companies which have proceeded with open-pit mining in protected forests.

Implications

If the Perpu is implemented the impacts will be severe, according to NGO predictions. Even if Nabiel Makarim is correct and only 13 companies will be permitted to resume operations, a huge area will be opened up to deforestation through mining. Apart from the mining operations themselves, the knock-on effects of mining, including access roads and settlements, plus the damaging impact of tailings disposal will also cause forest destruction. This is something that Indonesia can ill afford, with deforestation rates estimated at 3.8 million hectares per year, and with fatal floods, devastating landslides and crop-destroying droughts becoming more frequent as a result of forest loss.

One Indonesian organisation has attempted to put an economic price on the government's decision to allow mining in protected forests. Greenomics Indonesia estimates that Indonesia may lose at least Rp 70 trillion (around USD 8 billion) annually in environmental costs and declining regional revenues. The group's executive director, Elfian Effendi, said the environmental cost would be Rp 46.4 trillion (USD 5.4 bn) at the very least, calculated from the economic value of ecosystem services (water erosion, soil fertility) biodiversity and the costs of rivers destroyed by deforestation and sustainable use of non-forest timber products. A further Rp 23.1 trillion (USD 2.6 bn) was accounted for by the loss of over half of regional revenues in the agriculture, fisheries and trade sectors. The total cost was 70 times greater than the revenue generated by the mining sector, which amounted to Rp 1.07 trillion (USD 124 million) last year.

(Source: Peraturan Pemerintah Pengganti Undang Undang Republik Indonesia Nomor 1 Tahun 2004 tentang Perubahan Atas Undang-Undang Nomor 41 Tahun 1999 tentang Kehutanan, 11 Mar, 2004; Indonesia's New Anti-Terrorism Law: Damned if you Do, Damned if you Don't, by Tim Lindsey at www.law.unimelb.edu.au/alc/wip/anti-terrorism.html; Miningindo 24/Mar/04; Indonesian government decree doesn't alter ban on open-cut mining in protected forests, statement by WWF Indonesia, Indonesian Biodiversity Forum (Kehati), WALHI, JATAM and ICEL 15/Mar/04; Jakarta Post 16/Mar/04, 10, 13/Apr/04; Australian Financial Review 16/Mar/04; www.jatam.org; Asia Pulse/Antara 19/Mar/04; JATAM 20/Apr/04).

BHP Billiton on Gag Island

When contacted by the Australian Financial Review, a few days after the Perpu announcement, a spokesperson from BHP Billiton - developers of a proposed giant nickel mine on Gag Island, off West Papua - said that the company had not yet been notified of the decision and had no plans at this stage to recommence work at the site. The company has already spent about US$45 million and has been lobbying the government to let mining go ahead. According to the Review, a resumption of the project would be lucrative for the company because world nickel prices are at a 10-year high and few new projects are being developed.

The IMA's Paul Coutrier said the mine would benefit the island's 600 strong population, because BHP-Billiton would need to build a harbour, new roads and other infrastructure. However, NGOs believe the environmental price would far outweigh the benefits. Mining would threaten livelihood resources on this small island and pollute the surrounding waters. Gag is part of the Raja Ampat archipelago, which is being considered for World Heritage Site status due to its uniquely rich marine biodiversity. Last June, UNESCO expressed concern about mining to the Indonesian parliament. BHP-Billiton is proposing to dump tailings from the mine in the sea - a method known as Submarine Tailings Disposal, which is banned in many countries (see also box on Newmont campaign).

(Source Australian Financial Review 16/Mar/04; DTE 58)

Newcrest in Maluku

Reacting to news of the Perpu, Newcrest's Peter Reeve said the regulation had cleared up a lot of confusion which had slowed progress and caused additional expenses. Cited by The Australian, he said that despite the forestry law, Newcrest had always had full permission to run the open-pit Toguraci gold mine on Halmahera Island, North Maluku.

But, according to Indonesian mining and forestry officials, this is not the case. In an earlier edition of The Australian, officials said the company did not have permission to start mining, only to explore and develop the site up to the point of mining. The newspaper report says that mining operations had been going on for several weeks.

Local community representatives and supporting NGOs say that Newcrest has illegally extended its permit to mine at Gosowong to nearby Toguraci, although these are two separate locations.

This is the mine, where in January this year Indonesian special forces police (Brimob) opened fire on protesters who had occupied the minesite. Their requests for compensation had been rejected by the Newcrest subsidiary PT Halmahera Minerals. One person was shot dead and others wounded in the incident (see full report in DTE 60).

(Source: The Australian, 16/Mar/04 & 24/Feb/2004, DTE 60:1)