Indonesia faces environmental time bomb after coal bust

By Reuters/Fergus Jensen   June 30, 2016 | 07:50 pm PT
Indonesia faces environmental time bomb after coal bust
Villagers stand next to a used coal mining pit now filled with water at a coal mine near Samarinda, East Kalimantan province, Indonesia, March 2, 2016. Picture taken March 2, 2016. Photo by Reuters/Beawiharta
Thousands of mines are closing in Indonesia's tropical coal belt as prices languish and seams run dry. But almost none of the companies have paid their share of billions of dollars owed to repair the badly scarred landscape they have left behind.

Abandoned mine pits dot the bare, treeless hillsides in Samarinda, the capital of East Kalimantan province on Indonesia's part of Borneo Island. It is ground zero for a coal boom that made Indonesia the world's biggest exporter of the mineral that fuels power plants. Abandoned mining pits have now become death traps for children who swim in them, and their acidic water is killing nearby rice paddies.

Indonesia has tried, mostly in vain, to get mining companies to keep their promises to clean up the ravaged landscape. But it doesn't even have basic data on who holds the many thousands of mining licenses that were handed out during the boom days, officials say.

"Nobody was in control," said Dian Patria, who works on natural resources at the country's Corruption Eradication Commission (KPK).

Patria estimated that 90 percent of the more than 10,000 mining license holders had not paid the reclamation funds they owe by law. One-third are for coal.

Even if they wanted to, many companies now lack the cash. The same large banks that leant billions during the boom have now pulled out of coal, wary of the sector's commercial outlook and contribution to climate change.

The problem is not unique to Indonesia. As mineral prices languish, even major global miners are trying to avoid hundreds of millions of dollars in increasingly hefty closure costs, mostly by selling off pits.


An aerial view of used mine as seen in East Kalimantan province, Indonesia November 18, 2015 in this photo taken by Antara Foto. Photo by Reuters/Wahyu Putro A/Antara Foto

Few questions asked

After pro-democracy protesters swept Indonesia's authoritarian president Suharto from power in 1998, the Jakarta government gave towns and districts control of natural resources as part of far-reaching decentralization reforms aimed at preventing the archipelago from fracturing.

Newly empowered local leaders handed out thousands of mining licenses, many of them to small operators, as coal prices leapt from around $40 per ton in 2005 to nearly $200 at their peak in 2008. In East Kalimantan alone, around half the province was covered in coal mining permits.

Under President Joko Widodo, elected in 2014, Indonesia has promised to turn around its dismal environmental record. The administration has also wrested control over natural resources away from local leaders, giving it to provincial governors instead.

Awang Faroek Ishak, East Kalimantan's governor, has issued a moratorium on new licenses. He is threatening to punish mining companies that have failed to restore the land, he said in an interview. But the data on mining companies and funds for rehabilitation are missing, he said.

"How can we look into this if we don't have the documents," he complained.

Greenpeace activist Kiki Taufik says governors do, however, have the authority to freeze permits and operations while they investigate. "The governors have authority, but they never use this authority."


A tree seen as heavy machines work at a coal mine near Samarinda, East Kalimantan province, Indonesia, March 1, 2016. Picture taken March 1, 2016. Photo by Reuters/Beawiharta

Patchy oversight

Most of the mining licenses went to small firms, many of which have gone bankrupt or simply abandoned their operations, mining industry officials say.

"For now, it's really difficult not to lose money," said Budi Situmorang, a mining engineer at small coal miner CV Arjuna. "All we can really do is hold on. Looking at the 56 mines in Samarinda, no more than 10 are still active."

The mining companies themselves are supposed to restore the land from money they paid into accounts held at state banks and supervised by local officials.

"That's what you're supposed to do, but in practice very few people do it," except for the major mining firms, the head of Indonesia's Coal Mining Association, Pandu Sjahrir, told Reuters.


A villager harvests rice near an abandoned coal mine at Makroman village near Samarinda, East Kalimantan province, Indonesia, March 2, 2016. Picture taken March 2, 2016. Photo by Reuters/Beawiharta

The central government has had a list since 2011 of nearly 4,000 licenses that have failed to meet their requirements. It expects to be able to revoke the problematic permits only by January 2017.

Patria's team at the anti-corruption agency is pushing for the national government's Supreme Audit Agency (BPK) to investigate miners - including over unpaid rehabilitation funds estimated in the hundreds of millions.

Even that is only a fraction of the cash that would actually be required, says Merah Johansyah from the Mining Advocacy Network (JATAM).

Pressure from campaigners is increasing as mine closures reach a peak by 2020, according to some industry estimates. One set of 2,272 coal permits and contracts, compiled by mining consultancy SMGC and reviewed by Reuters, showed the average expiry date of the permit is October 2017.


A broken excavator is seen at a used coal mining pit now filled with water at a coal mine near Samarinda, East Kalimantan province, Indonesia, March 2, 2016. Picture taken March 2, 2016. Photo by Reuters/Beawiharta

Mining without permits

But environmental watchdogs say an end to permits does not mean an end to mining. "In East Kalimantan, even where permits have long been revoked, they're still operating," Syahrul Fitra, a legal researcher at the environmental NGO Auriga told Reuters. "What we found in the field is that no punishments have been applied."

In areas where companies are conducting reclamation activities, it is usually not to replant forests -- most mining concessions are being turned into housing developments, agricultural land or other uses, environmentalists and industry officials say.

In the meantime, the run-off water and mud from abandoned pits, numbering around 150 in Samarinda alone, are polluting surrounding rice paddies and rivers.


A coal miner stands inside his temporary shelter at a village near Samarinda, East Kalimantan province, Indonesia, March 2, 2016. Picture taken March 2, 2016. Photo by Reuters/Beawiharta

After his employer closed a small mine in Samarinda, Suyadi, who like many Indonesians uses one name, went back to working the small rice paddy on his family's farm on the edge of the city. The mines, however, have followed him there.

"Like it or not, the tailings flow here," says Suyadi, referring to the stream of chemically treated mining debris that is left after coal is extracted.

"If they continue to leave it like this, where else will that water flow? To the lower areas where there are rice paddies," Suyadi said.

The attractive aqua hue of the water in the abandoned pits conceals a darker story: 24 local children using them as swimming holes have drowned around Samarinda over the past five years.

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