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The Existence of the IUP OPK License After Law Number 3 of 2020 on Mineral and Coal Mining
DENDI-TU-2023

Dendi Adisuryo

Law Number 3 of 2020

Mining Business License (Izin Usaha Pertambangan, “IUP”) is one of the licenses required by mining entrepreneurs in conducting business activities in the mining sector which generally starts from the stages of general investigation, exploration and feasibility studies. In addition, other required license is Production Operation IUP (Operasi Produksi, ”OP” ) which includes the stages of construction, mining, processing and refining, transportation and sales. These licenses have been regulated by the Government, in this case the Ministry of Energy and Mineral Resources (“MEMR”). However, there are legal entities or companies that are specifically engaged in the processing and refining and also transportation and sales of mineral and coal materials that have special license in the form of Special Production Operations IUP (Operasi Produksi Khusus, “OPK”) which by the prevailing laws and regulations are currently experiencing amendments in implementation after the enactment of Law number 3 of 2020 on Amendments to Law Number 4 of 2009 on Mineral and Coal Mining. This article will provide an outline and an overview of the amendments that have occurred to the Transportation and Sales Sector License and the occurrence of the Transfer of Processing and Refining Sector.

A. Legal Basis

  1. Government Regulation Number 23 of 2010 on the Implementation of Mineral and Coal Mining Business Activities (“GR 23/2010”)
  2. Law Number 4 of 2009 on Mineral and Coal Mining (“Law 4/2009”)
  3. Government Regulation Number 77 of 2014 Third Amendment to Government Regulation Number 23 of 2010 on the Implementation of Mineral and Coal Mining Business Activities (“GR 77/2014”)
  4. Law Number 3 of 2020 on Amendments to Law Number 4 of 2009 on Mineral and Coal Mining (“Law 3/2020”)
  5. Government Regulation Number 96 of 2021 on Implementation of Mineral and Coal Mining Business Activities (“GR 96/2021”)

Law Number 3 of 2020

B. Transportation and Sales Sector License

In the previous statutory regulations, special permits have been regulated for the Transportation and Sales sector. Definitively as stipulated in Article 1 of Law 4/2009, Transportation is a mining business activity to move minerals and/or coal from the mining area and/or processing and refining site to the place of delivery, and Sales is a mining business activity to sell mineral or coal mining products. Law 4/2009 did not explicitly regulate the license required by business entities that is specifically engaged in the transportation and sales of minerals or coal (Trader). Law 4/2009 only stipulated that Transportation and Sales activities are included in the IUP OP as regulated in Article 36. 

 

Furthermore, a derivative regulation which is the mandate of Law 4/2009 namely GR 23/2010 as last amended by GR 77/2014, stated that in the event that the IUP OP holders does not carry out transportation and sales and/or processing and refining activities, such activity can be carried out by other parties who have:

 

  1. The IUP OPK for transportation and sales; or
  2. The IUP OPK for processing and refining;

 

In the case of the IUP OPK for transportation and sales, such license is granted by:

 

  1. Minister, if the transportation and sales activities are carried out across provinces and countries;
  2. Governor, if the transportation and sales activities are carried out across districts/cities; or
  3. Regent/mayor, if the transportation and sales activities are in 1 (one) district/city.

 

In addition, the IUP OPK for processing and refining is granted by:

 

  1. Minister, if the mining commodity to be processed comes from another province and/or the location of processing and refining activities is across provinces;
  2. Governor, if the mining commodity to be processed comes from several regencies/cities within 1 (one) province and/or the location of processing and refining activities is across regencies/cities; or
  3. Regent/mayor, if the mining commodity to be processed comes from 1 (one) regency/city and/or the location of processing and refining activities is in 1 (one) regency/city.

 

The licenses mentioned above have undergone changes, especially in terms of nomenclature after the enactment of Law 3/2020 as stipulated in Article 35. Article 35 is amended in Law 4/2009 which initially stated that mining business was carried out, one of which was in the form of the IUP as divided into the Exploration IUP and the IUP OP. This was later changed in Law 3/2020 specifically in nomenclature to become a Transportation and Sales license. The Transport and Sales license is definitively a new definition in Article 1 of Law 3/2020 which states that the Transport and Sales license is a business license granted to a company to buy, transport and sell Mineral or Coal mining commodities. This is confirmed by stating that mining business activities are carried out based on a Business License from the Central Government through the granting of a license called a Transport and Sales license (Article 35 paragraph 3 letter g).

 

In practice, Article 169C of Law 3/2020 still guarantees the validity of the IUP OPK for Transportation and Sales that have been owned by business entities that were previously proposed for the enactment of Law 3/2020 by stating that the IUP OPK is valid until the expiration of the license, therefore no necessity to apply for a new license after the enactment of Law 3/2020. Furthermore, there is an obligation for the IUP OPK holders for transportation and sales to fulfill the fulfillment of Business License within a period of 2 (two) years and there is an obligation for governors to submit the IUP OPK documents for transportation and sales to MEMR for renewal. However, for licenses that have just been applied for by the relevant business entities, especially this year, have been changed to Transportation and Sales licenses as stipulated in further requirements for fulfillment in GR 96/2021.

Law Number 3 of 2020

C. Transfer of Processing and Refining Sector

The previous regulation, namely Law 4/2009, it is mandated to the government to consistently implement the obligation to develop mineral processing and refining (Smelter). In general, processing and refining activities are an increase in added value carried out through processing, smelting and refining minerals, from raw materials in the form of ore into a final product in the form of metal. This activity aims to produce a further product or commodity so that its economic value and usefulness increase higher than before. 

 

Moreover, Law 4/2009 did not explicitly regulate the IUP OPK for processing and refining. Article 103 and Article 104 of Law 4/2009 only stipulated that the IUP holders are required to process and purify mining products domestically. In principle, the IUP OP holders can cooperate with business entities that have received the IUP, especially the IUP OPK for processing and refining, which further prohibits the IUP OPK for processing and refining holders to processing and refining mining products from parties that do not have the IUP.

 

However, after the enactment of Law Number 3 of 2020 as regulated in Article 169C, it is stated that the IUP OPK for processing and refining that is issued before the enactment of Law 3/2020 undergoes a license transition into an Industrial Business Permit (Izin Usaha Industri, “IUI”) within a period of no later than 1 (one) year since the Law 3/2020 is valid so that in the future applications this permit will be issued by the Ministry of Industry (“MIM”) replacing the IUP which has been issued by MEMR. The transfer of authority for mineral refining that is handed over to MIM is expected to be able to integrate downstream mining with industrialization policies to create ease of doing business so that industrialization policies, including mineral and coal, are integrated in MIM.

 

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ADCO Law as a Law Firm in Jakarta has a broad mining legal practice conducted either on public or private lands in Indonesia. We assist our clients in the stages of mining exploration and development, in handling issues related to mining royalty and joint venture/partnership agreements. We also provide assistance to defend mining companies against administrative claims pursued by state agencies.

Should you have more queries regarding this matter, please do not hesitate to contact us.

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Disclaimer: This article has been prepared for scientific reading and marketing purposes only from ADCO Law. Accordingly, all the writings contained herein do not constitute the formal legal opinion of ADCO Law. Therefore, ADCO Law should be held harmless of and/or cannot be held responsible for anything performed by entities who use this writing outside the purposes of ADCO Law.