Mining Under Indonesia's New Environmental Law

The new law on Environmental Protection and Management (Republic of Indonesia Law 32 of 2009) was passed by the Indonesian parliament in September 2009. This law aims to protect Indonesia's rapidly degrading environment by providing tougher provisions for both polluters and law enforcers. In doing so, the law introduces a number of new constraints and potential business risks that will affect all companies in Indonesia, particularly mining companies. Some of the newly introduced concepts follow.   Mining companies will now require an environmental license, issued by the Minister of Environment or local counterparts. This license is a prerequisite for all other business and operational permits. The Minister can revoke the environmental license at any time in case of an environmental incident or dispute. Mining companies may be exposed to additional environmental taxes and bonds besides already existing reclamation and mine closure bonds.   There is an increased risk of environmental lawsuits, due to more stringent controls on one side and greater protection for NGOs on the other side who make claims, false or true, against the company. Company executives and managers can be sued and they will be held accountable if environmental degradation has indeed occurred due to the company's activities.   Companies may face increased liabilities due to a change in the definition of contamination. The new definition is more stringent (and on occasion may prove too stringent to be practical); it also provides little room for flexibility in its application.   As implementing regulations are prepared over the coming two to three years, mining companies will need to adjust to the new law. A proactive approach is needed to minimise risk. Recommended actions include: upgrading existing environmental impact assessments to a higher standard; conducting baseline studies and thoroughly documenting environmental conditions on a regular basis; closely tracking regulatory changes, especially the forthcoming implementing regulations on the new environmental law; and regularly engaging key government and community stakeholders on environmental issues.