With the enactment of the new Mining Law, we may now face the dilemma of Ulysses when he navigated his ship: To sail toward the Scylla cliff to avoid the Charybdis whirlpool.
The new Mining Law seems to have better and clearer rules on the permitting of mines and on the financial responsibilities of mine operators. However, the Indonesian Mining Association (IMA) argues, quite correctly, that the law will scare off multinational mining companies. This eventually will affect foreign investment and the environment. Why so?
Part of this is due to the loss of long-term security of tenure under the new mining regime. Multinational mining companies are interested in developing large mineral deposits.
It would be naive to assume that any foreign company would commit to the massive investment without long-term security of tenure.
There is also the point that the law requires mine investors to commit to downstream mineral processing. While noble in its intention, only time will tell how such a directive aligns with the global economic forces that characterize today's mining industry, including a continuing trend from small-scale mining to larger, consolidated mining operations - a trend the new Mining Law runs counter to.
Moreover, IMA anticipates that the law will proliferate small-to-medium mining throughout Indonesia, like acne on the face of Indonesia's landscape. From the standpoint of environmental protection, this proliferation, if not strategically managed, will be problematic if not catastrophic.
Let's start with today's global environmental awareness. Multinational companies cannot afford to adopt low environmental standards anywhere without endangering their global reputation and their ability to raise funds for mining projects in other parts of the world. None of this is a concern for a locally operating small-to-medium mining company.
Mine developers who borrow funds from Equator Principles Financial Institutions (EPFI), which account for 80 percent of private funding worldwide, have to comply with the International Finance Corporation's Environmental and Social Performance Standards, a leading practice in the environmental assessment of a new mine. These standards cover aspects such as environmental management (including AMDAL/EIA), biodiversity protection, land acquisition and resettlement planning, or indigenous peoples development.
These safeguards are rigidly mandated by the lenders to the borrowers. Securing funding is costly and may take years. Considering these high costs and the lengthy process, it is fair to assume that small-to-medium mine developers may be tempted to borrow money from the softer windows that do not require compliance with such rigid environmental and social safeguards.
During operation, EPFI-financed mining projects have to comply with a myriad of environmental protection and management measures: Mandatory standards such as environmental and social regulations, and voluntary best practices such as Environmental Management Systems (EMS) like the ISO 14000 series, the International Charter of Mining and Minerals, or PROPER. Conformance.
These requirements do not come cheap; They also require highly trained staff and systematic monitoring. Small mine operations, likely cash-strapped, will avoid such environmental practices. Again the outcome is clear -- environmental protection and possibly even work safety may be compromised.
Consider now mining's physical impacts. Admittedly, bigger mines have bigger physical impacts. The ecological footprint of a big mine (say 200,000 hectares) is larger than that of a small mine (say 15,000 hectares).
But what about 20 small mines operating in one province? Their cumulative impact can be staggering, or worse, spread all over the province with little accountability or clear responsibility.
To make things worse, environmental damage from mining is often delayed. The impact of acid mine drainage, for example, will not be evident for several years after the mine is closed. By that time, small and medium mines, with shorter life spans, have already ceased operations and gone.
There is of course also the valid observation that size alone does not determine the significance of environmental pollution.
A case in point is artisanal gold mining, a practice that commonly uses mercury to extract gold from the host rock and has long been banned by multinational mining companies.
On social issues, communities will likely suffer the most from the new Mining Law. Solid community development (CD) programs need time, money and a diligent process. Multinational companies have learned the hard way that CD and social programs are not charities but part of doing business.
To protect their long-term investments, they have learned to engage in CD programs systematically, patiently and sometimes even painfully. Mistakes are still made, considering that nothing is foolproof in this context.
A small mine, operating in a shorter period, may not have enough time to engage in sustainable CD programs.
The lack of consistent CD is likely worse in cases where several small mines operate in parallel; there is no clear-cut responsibility.
Unfortunately there is an even more convincing argument that supports our conclusion that host communities will suffer most: There will be simply not enough mines that will convert minerals into wealth and into opportunities for much needed regional development.
What to do? The journey continues and more challenges are ahead. Lawmakers are advised to consider the impacts of the new Mining Law on environmental and social issues through carefully written and enforced bylaws.
More importantly, they should not be naive in assuming that the impact of big mining operations on environmental, social and regional development are always worse than that of small-to-medium mines.
The writers are senior consultants of PT Environmental Resources Management. This article is their personal view.
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