The Minister of Forestry has issued Regulation No. P.18/Menhut-II/2011 on Guidelines for Borrow-to-Use Permits for Forest Areas (“MOF Regulation”), which replaces and repeals Minister of Forestry Regulation Number P.43/Menhut-II/2008. This new MOF Regulation is the implementing regulation of Government Regulation No. 24 of 2010 on Forest Area Utilization.
MOF Regulation provides that a borrow-to-use permit (izin pinjam pakai) from the Minister of Forestry (“MOF”) is required to use production and protected forests for non-forestry development activities such as general mining activities, power plant installations, power transmission and power distribution activities (among others).
With respect to mining activities, open cut mining is prohibited in protected forests (although underground mining is still allowed), whereas both open cut and underground mining are allowed in production forests.
A separate regulation on underground mining in protected forests has been issued as Presidential Regulation No. 28 of 2011 on the Utilization of Protected Forests for Underground Mining (the “Presidential Regulation”).
The application for a borrow-to-use permit must satisfy both administrative and the technical requirements. If the administrative and technical requirements are satisfied, the MOF will first issue an in-principle approval imposing certain obligations on the applicant before a permanent borrow-to-use permit is issued, including the provision of compensation land.
As a general rule, the applicant for a borrow-to-use permit must provide
compensation to the MOF in the form of land. The compensation scheme formula and requirements are set out in the MOF Regulation.
Presidential Regulation No. 28 of 2011 on the Utilization of Protected Forests for Underground Mining also requires an in-principle approval, followed by a borrow-to-use permit. An application for an in-principle approval should be submitted to the MOF along with the required documents. Within 2 years (extendible) of the in-principle approval being issued by the MOF, the mining company must satisfy certain specified requirements in order to obtain the borrow-to-use permit.
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