House passes geothermal bill into law

Fitri Wulandari, The Jakarta Post, Jakarta

All nine factions of the House of Representatives agreed to pass the geothermal bill into law on Tuesday, which is expected to be able to lure more investors into developing the country's geothermal sector.

They said it would give legal certainty for investors to invest in the high-risk geothermal sector in the country while protecting the public from environmental hazards caused by geothermal exploration activities.

Minister of Research and Technology Hatta Radjasa, on behalf of the minister of energy and mineral resources, said the law was expected to attract investors to the sector.

The law covers operational management, revenue splits between the central and regional government, as well as division of authority between the two in managing the geothermal resources.

"Thus, regions with geothermal resources could benefit (from the investment)," Hatta said in his speech before the plenary session.

Incentives to be offered to investors in the geothermal sector according to the law include tax facilities.

"The law will provide legal certainty for investors to get tax facilities according to related regulations," Hatta said.

Geothermal energy refers to underground steam that can be used to generate power. It is considered an environmentally clean energy source.

Sitting on the so-called "ring of fire" volcano belt, Indonesia is blessed with enormous geothermal resources.

Indonesian Geothermal Association (INAGA) data says 40 percent of the world's geothermal resources are located in Indonesia, which could potentially produce 20,000 megawatts (MW) of electricity.

Geothermal resources were under the supervision of state-owned oil and gas company Pertamina until May 2000, when the government issued regulations transferring supervisory powers to local governments.

In 2002, Pertamina handed over to the government 18 geothermal fields. Pertamina could not operate the fields because of a lack of funds.

Hatta added the law was crucial as fossil fuel had limited supplies and was non-renewable.

Irwan Prayitno of the Reform faction said the law will not only guarantee returns on investment but also make sure contracts will be respected.

According to Irwan, the law stipulates that contracts for developing geothermal resources spans between 20 years to 30 years.

"Development of geothermal resources so far is very limited. The law could boost wider use of geothermal energy," Irwan told The Jakarta Post.

His counterpart, Rustam E. Tamburaka of Golkar Party faction, said his party supported the law on the grounds that geothermal energy could be used to prevent a power crisis.

At present, Indonesia has a number of geothermal power plants with a combined capacity of 747.5 MW. The plants are located in Kamojang, Salak, Darajat and Wayang Windu in West Java; Lahendong in North Sulawesi and Sibayak in North Sumatra.