Client Newsflash

New Regional Government Law Consolidates Authority to Issue Mining Licenses in Central and Provincial Governments

Law No. 23 of 2014 regarding Regional Governance (2014 Regional Law) was enacted on October 5, 2014, to redefine, yet again, relations between, and authorities among, the Central, Provincial and Local Governments, as previously stipulated under Law No. 32 of 2004 on Regional Governance, as lastly amended by Law No. 12 of 2008.

 The 2014 Regional Law contains detailed provisions on the relationship between the different levels of government and clear-cut divisions of authority between the Central and Regional Governments over 32 different sectors, including:

  1. Food
  2. Transportation
  3. Cooperatives, and micro, small and medium enterprises
  4. Investment
  5. Marine and fishery affairs
  6. Agriculture
  7. Forestry
  8. Energy and mineral resources
  9. Trade and industry

♦  IMPACT ON THE MINING SECTOR

The Appendix of the 2014 Regional Law divides authorities between the Central Government and Provincial Governments over mining. The most notable change is that Regency and City Governments are now excluded from having any authority over mining activities. Under the 2009 Mining Law, domestic mining companies operating in a single Regency obtained their IUP from the Regent; this licensing authority now belongs to the Governor. Foreign-owned (PMA) mining companies continue to be under the jurisdiction of the Central Government, as was the case under existing mining regulations.

The New Regional Government Law and Mining 1

The New Regional Government Law and Mining 2

♦  GOVERNMENT CONFIRMS IMPACT ON LOCAL GOVERNMENT

On December 16, 2014, the Directorate General of Minerals and Coal of the MEMR held a public forum to socialize the new law, in which they clarified that after issuance of the Regional Law, the Regency and City Governments are no longer authorized to issue IUP. Such Governments will continue processing IUP applications that were submitted before the enforcement date of the 2014 Regional Law (October 2, 2014) and will have authority to issue technical recommendations for IUP that will be granted in the future by the Provincial and Central Governments.

Local governments also retain supervisory authority over all licenses issued by them prior to the 2014 Regional Law, until expiration.

However, pending the issuance of implementing regulations by the Ministry of Home Affairs and MEMR or the transfer of documentation from the Regency and City Governments to the Provincial Government (or to the MEMR, for PMA companies), the Regency and City Governments should remain authorized in issuing approvals for extending and upgrading IUP.

The Regional Law requires that such a transfer must be completed within two years, by October 2016.

  • CONCLUSION

There are significant differences between the 2014 Regional Law and the 2009 Mining Law, although as previously mentioned many of the provisions contained in the 2014 Regional Law were already in place pursuant to the most recent implementing regulations of the Mining Law. We have been advised that an upcoming amendment to the 2009 Mining Law will rectify many of the inconsistencies.

January 14, 2015

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