East Kalimantan Environmentally Sustainable Development Strategy

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Unlike timber or oil palm plantations, only a portion of a mining concession is deforested.
Initial mining concessions start with exploration or feasibility study permits. For large
miners, these concessions typically shrink by 60 to 75 percent as they move to production
concessions; this is the result of exploration identifying the actual areas with commercially
recoverable coal. In addition, a land rent is charged based on the size of the production
concession, which encourages companies to seek the minimum size required. The average
production concession for a large miner is 28,000 ha; of this, typically 20 percent of the area is
disturbed, meaning that the earth is dug up and all vegetation on the surface is destroyed. The
average size of a production concession for small miners is just 1,000 ha. Typically 75 percent of
this small area is disturbed. (See Box 5 for more about being a KP miner.) The small companies
have a higher deforestation rate for two reasons. First, they have far smaller areas than big
companies; therefore the proportion of forested land they clear is bigger. Second, the small
companies have less sophisticated exploration equipment; therefore they are less targeted and
systematic in clearing the forests. The amount of deforestation depends on the whether the
disturbed land originally contained forests or already degraded lands.
Story of a KP Miner
Small miners face many challenges across the value chain in doing coal business in East Kalimantan.
The challenges begin when the small miners apply for mining permits. Lack of transparency and
lengthy bureaucracy of the application process create situations that are conducive for covert
“transactions”. Many small miners complained about the “transactions” which are, in many cases,
costly, uncertain, and risky.
Once the mining permit is obtained, the next challenge is securing land access. The small miners
need to compensate the local communities who live on top of the mining deposit or convince the HPH
companies who hold logging licenses for the area to allow them to access the land. The small miners
also need to tackle the so-called land mafias and land speculators by themselves.
The challenges do not end after land access has been secured. During the mining operation, the
small miners must still manage the local mafias. These local mafias sometimes disguise themselves
as legitimate stakeholders: members of local communities that are disturbed by mining operation,
NGOs which fight for the local communities, or even as government officials that come to collect
some kind mining retribution (lack of clear regulation allows this to happen). Furthermore, theft is
common during the transportation of coal from the site to the port (small miners do not build their
own ports or roads, but utilize the publicly available roads and ports). At certain locations, thieves
come and hop on to the coal truck or coal barge, take whatever they can, and then hop off.
DRAFT
Lack of infrastructure also causes problems for the small miners. When their coal arrives at a port,
the small miners must wait for their turn to ship their coal. Many times at certain ports, when the
water level is too low and no barge can come in, the waiting time can be very long.
All of the above challenges – combined with their small area under license and lack of equipment and
knowhow – lead to low margins for the small miners. To survive, the small miners then try to find
ways to cut costs, which often results in skimping on proper land reclamation and rehabilitation.
Box 5
Going forward, the deforestation rate will likely increase as new production concessions
are increasingly likely to be awarded to small companies. In 2008, of the 1 million ha of licensed
production concessions, around 192,000 ha have been deforested. Although small companies
hold only 28 percent of the total area of production concessions, they account for 61 percent of the
deforestation area. There are currently an additional 3 million ha worth of coal exploration licenses
in East Kalimantan; given historical patterns, these would translate into an additional 1 million ha of
production concessions by 2030, of which around 564,000 ha would be deforested. This implies an
average deforestation rate of 56 percent of the total production area. The higher deforestation rate