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A Sumatran forest community braces for battle against a planned coal mine

  • The Pangkalan Kapas forest on the eastern coast of Indonesia’s Sumatra Island is important both to local communities and to the endangered wildlife of a nearby nature reserve.
  • But it faces what conservationists fear is an existential threat from a planned coal mine that has been granted a 3,000-hectare (7,400-acre) concession for open-pit mining there.
  • The project has met with resistance from local communities and environmental activists, including an online petition calling for it to be scrapped.
  • The company that holds the concession was also mired in a fraud and corruption case involving one of its owners — a common problem in Indonesia’s notoriously corrupt mining sector.

PEKANBARU, Indonesia — The Pangkalan Kapas forest on the eastern coast of Indonesia’s Sumatra Island is central to the livelihoods of local villagers and the survival of the endangered wildlife in a nearby nature reserve. But it faces what conservationists fear is an existential threat from one of the most ubiquitous industries here: coal mining.

In 2018, the environment ministry recognized 5,500 hectares (13,600 acres) of Pangkalan Kapas in Kampar district, Riau province, as a community forest. That designation allows farmers to grow crops and trees within the area, with the obligation to conserve the ecosystem’s integrity.

However, a proposed coal mine has become an imminent threat to the forest. In addition to the ecological concerns, the concession is mired in a fraud and corruption case involving one of its listed owners. The project has met with resistance from local communities and environmental activists.

Malaysian-owned PT Buana Tambang Jaya (BTJ) has sought for nearly a decade to mine coal in the Pangkalan Kapas forest. In 2010, it secured a concession on 3,000 hectares (7,400 acres) of land, and five years later obtained a production permit from the provincial government.

But the company had proposed mining only 200 hectares (500 acres), which happen to be in the heart of the community forest and connected to the Rimbang Baling Nature Reserve. To kick off its mining activities, PT BTJ would have to obtain a lease, known by its Indonesian abbreviation IPPKH, from the national government.

The 200-hectare site was identified as a commercially viable coal reserve, according to Arthur Tarigan, the mining and geology consultant for PT BTJ, who is involved in the process of applying for the forest area lease.

“We might relinquish the rest,” he said. “If not, we will pay the taxes.”

Indonesia’s Riau province on the island of Sumatra. Image by TUBS via Wikimedia Commons (CC BY-SA 3.0).
Boats are a common form of transportation through the Pangkalan Kapas forest. Image by Suryadi/Mongabay Indonesia.

Though the company says it plans to exploit only this small part of its total concession, environmental activists have warned that the mining activities will damage the surrounding ecosystem, which is crucial for the locals and wildlife.

PT BTJ’s larger concession straddles forest area, farms and homes, and forest corridors that connect to Rimbang Baling Nature Reserve, which is home to Sumatran tigers (Panthera tigris sumatrae), according to Alhamran Ariawan, the policy and enforcement officer for WWF-Indonesia’s central Sumatra program.

Alhamran said the company would use explosives to create the open-pit mine, which could destroy the surrounding area and pollute the riverine system that feeds the Rimbang Baling reserve.

The access road to the mining site that the company will build from West Sumatra province to Tanjung Permai village in Pangkalan Kapas will slice through community forest, according to Ulil Amri, a field researcher for Riau-based environmental group Mitra Insani Foundation.

Ulil launched an online petition earlier this year calling for a halt to the planned mine, and has now garnered more than 2,000 signatures.

An access road to the proposed coal mining site. Image by Suryadi/Mongabay Indonesia.

PT BTJ’s Arthur said there would be environmental impacts from the mining activities, but promised to employ techniques to minimalize them. He also confirmed the company would use explosives, but would notify residents in advance. Arthur added that the company would use a water tank to deal with the debris from transporting coal, to prevent it polluting the rivers.

“There will be impacts,” Arthur said. “What’s important is how the company and the government truly implement their controls. Look, even though we haven’t started our operation, we’ve already disbursed corporate social responsibility funds.”

A checkered history

PT BTJ was founded in 2015 as an Indonesian company, owned by two men: Hutomo Wijaya Ongowarsito and Elka Tanudjaya. In July 2011, the founders sold an 80 percent stake in their company to three Malaysian nationals: Lim Mee Lein, Lim Chee Kait and Lim Chee Yei. The co-founders retain a 20 percent stake, according to government records.

Yet both before and after the sale of the majority stake, Hutomo was embroiled in business dealings that resulted in a fraud and corruption prosecution.

In 2010, after securing the concession in Kampar, Hutomo started looking for potential buyers for a stake in the mine. According to court documents, in May 2010 Hutomo met Koestanto Hariyadi Widjaya, a director at mining company PT Grand Wahana Indonesia, who agreed in principle to finance the work necessary to get a production license.

Court records show that Hutomo asked Koestanto in a follow-up meeting for an advance of 400 million rupiah (about $44,000 at that time) that he said was needed to get the production license, and offered to hand over full ownership of the mine project to Koestanto after he obtained the production license. After visiting the proposed mine site, Koestanto paid the requested advance.

In June 2010, Hutomo and Koestanto eventually agreed on a sale price of 7 billion rupiah (about $773,000) for the production permit and full ownership of the mine, according to court documents. Four months later, the permit was issued. But instead of sticking to the agreement with Koestanto, Hutomo sold the permit to another company, PT Barakuda, in February 2011.

Koestanto, who had already paid out the initial 400 million rupiah, filed criminal charges against Hutomo for fraud. A court in Jakarta ruled that while Hutomo had committed fraud, the case was a civil matter rather than a criminal one, effectively clearing Hutomo of the charges.

Prosecutor appealed to the Supreme Court, but in August 2013, the court upheld the earlier verdict.

Shortly before that decision, however, Koestanto’s lawyer and a Supreme Court clerk were arrested and charged with corruption by the country’s anti-graft agency, the KPK. Koestanto’s lawyer, Mario Cornelio Bernardo, was accused of paying the clerk 150 million rupiah ($13,200) in exchange for a favorable verdict for Koestanto’s favor. (The lawyer, in turn, was up for a 1 billion rupiah bonus, about $88,000, from Koestanto if he could deliver.)

Residents of Pangkalan Kapas protest against the proposed coal mining project. Image by Suryadi/Mongabay Indonesia.

Though prosecutors haven’t alleged any wrongdoing by PT BTJ itself in its licensing process, the history of business dealings by the company’s co-owner after obtaining the concession has raised red flags. Indonesia’s mining sector has long been rife with corruption, most commonly the issuance of permits by local officials in exchange for bribes from companies.

The KPK has identified more than 1,000 mining companies operating without proper permits in forest areas, and pegged the state losses as a result at 15.9 trillion rupiah ($1.1 billion) per year.

Arthur, PT BTJ’s geology consultant, said Hutomo was no longer involved in PT BTJ. “From what I know, his shares have been handed over to Ahmad Zaini who also serves as the executive director,” he said.

While the coal company works to secure its operation, the people of Pangkalan Kapas together with conservationists carry on with improving the management and protection of the forest.

This story was first reported by Mongabay’s Indonesia team and published here on our Indonesian site on July 3, 2019.

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