East Kalimantan Environmentally Sustainable Development Strategy

84
procurement is only allowed with the approval of the Minister of Energy and Mineral Resources.
However, as the CBM business is relatively new for Indonesia, no local equipment suppliers and
contractors have yet built the skills to support large-scale CBM development projects. Existing
procurement rules and local content requirements make it difficult for CBM operators to import
necessary skills and equipment.
Conflicts regarding access to land hinder the development of CBM. Much of the land on top
of CBM basins is likely to be already held by other parties, e.g., coal miners, oil and gas companies,
oil palm plantations, or logging companies. Although Kepmen No 36/2008 has clarified the rules
on CBM operators’ rights and land access, i.e., CBM companies can negotiate with other parties
for land access, it does not go far enough to resolve the lengthy negotiation process involved
between the CBM operator and multiple parties and the price to be paid for land access.
Unclear regulations on water management, especially when the CBM fields are far from
the sea or rivers, hinder the development of CBM. The dewatering processes during CBM
development produce large streams of water that need to be properly diverted. However, current
regulations are not clear about how to implement this requirement.
East Kalimantan needs to lobby the Ministry of Energy and Mineral Resources to
address four challenges of CBM development: (1) In 2011, the central government plans to
introduce new PSC regulations that will provide more flexible procedures for CBM operators. East
Kalimantan should play a proactive role in collecting feedback from major CBM companies and
escalating this back to the central government; (2) East Kalimantan should request that the central
government permit CBM operators to import non-local equipment and supplies without having
to apply for ministerial approval until local contractors and suppliers emerge; (3) East Kalimantan
should take a proactive role to facilitate the negotiation processes of land access between
multiple parties; and (4) East Kalimantan should work with relevant parties, such as the Ministry of
Environment and Ministry of Mining, to clarify the issue of water management once for all.
4. District strategies
DRAFT
Strategies for individual districts take account of their situations with respect to the district’s size
and population, current land use, levels of emissions and potential for abatement, and GDP and
employment for the five primary sectors. For instance, populous and urban Balikpapan has little
potential for abatement, except for reforestation and working to promote operational improvements
in the Pertamina refinery, but will benefit from the environmentally sustainable development
strategies used in other districts, such as the development of downstream industries for the forestry
sector. On the other hand, resource rich Kutai Barat has great opportunities for abatement by
working with its palm oil industry in the areas of zero burning, utilization of degraded land, etc. and
with its forestry industry in the areas of Sustainable Forest Management (SFM) and avoiding further
deforestation. District emissions will change over time under business as usual as already deforested
districts see fewer emissions from decreased land use changes while heavily forested districts today
could be at the frontier for accelerated deforestation. The district strategies follow:
BALIKPAPAN
Balikpapan is the commercial center of East Kalimantan. The city’s GDP exceeded IDR 13
trillion in 2006, it hosts the regional headquarters for many businesses, and its airport is the major
entry point to East Kalimantan. Balikpapan hosts Indonesia’s second largest refinery and acts as
the regional base for many of the province’s oil and gas companies. Oil and gas accounts directly
for 40 percent of the city’s GDP; the industry has also helped spur the growth of services, which
account for another 40 percent of GDP.