Indonesia: Key Provision On New Rencana Kerja Dan Anggaran Biaya (RKAB) Regulations

The Ministry of Energy and Mineral Resources ("MEMR") has recently issued a MEMR Regulation outlining the Annual Working and Budget Plan (referred to as "Rencana Kerja dan Anggaran Biaya" or "RKAB"). The new MEMR Regulation will regulate and change some provisions related to the RKAB. One of the most notable is the differentiation of the RKAB's terms in the exploration and operation production stage. For the exploration stage, the RKAB must be submitted annually, while for the operational production stage, the RKAB submission must be submitted every three years.

The Izin Usaha Pertambangan ("IUP") holders can submit the RKAB for the exploration stage no earlier than 90 days and no later than 45 days before the end of the current year. A new provision is made for RKAB in the operation production stage. The company can now submit the RKAB following the submission of the second quarterly report and no later than 45 days before the end of the current year. The Directorate General of Mineral and Coal ("DGMC"), on behalf of MEMR, will evaluate the submission and provide an evaluation no later than 30 days from the submission date. The new regulation allows the IUP holders to revise the RKAB once, although it is possible to change the RKAB more than once, provided that the requisite criteria are met.

Besides the parameter and technical evaluation for the RKAB, the new regulation underscores the imperative that IUP holders refrain from doing any mining activity, including revising the Feasibility Study, withoutthe RKAB's approval. In addition, the IUP holder is also expressly prohibited from mining or producing the mineral or coal more than the allocated amount specified in the RKAB. Failure to comply with either of these two provisions will result in the immediate revocation of the IUP without issuance of a prior warning letter.

The new regulation also governs the reporting obligation. The mining service ("IUJP") holder must now provide a periodic report to MEMR through the DGMC. This represents a departure from the existing provision, wherein IUJP holders must report to the contracting IUP holder.

In general, the spirit of the new regulation is to provide better governance and efficiency within the realm of licensing services while at the same time providing a more stringent stance toward non-compliance with the RKAB regulations.

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