Indonesia Will Summon Freeport on Environmental Damage

The Company Has Costs US$13.5 Billion

Freeport Workers - Photo by PT Freeport Indonesia

JAKARTA (TheInsiderStories) – Indonesian Government to sue the U.S. gold and copper miner Freeport Mcmoran Inc. (NYSE: FCX) for polluting the environment, said one official on Monday (20/03).

The Supreme Audit Agency has said that ecological damage resulting from PT Freeport Indonesia‘s (PTFI) mining operations in Papua had caused Rp 185 trillion (US$13.50 billion) in state losses. The amount based on the calculations of experts at Bogor of Agriculture Institute.

Yazid Nurhuda, the Ministry’s Director of Complaints, Oversight, and Administrative Sanctions for Environment and Forestry Ministry said the ministry would summon environmental experts to calculate the losses inflicted by PTFI.

According to him, the Indonesian government will file a lawsuit against PTFI based on the polluter pays principle as regulated by Law Number 31/2009 on environmental management and protection. This is related to the losses of forest space, diminishing biodiversity, or pollution exceeding the government’s standards.

Government said Freeport’s violation had damaged the ecosystem such as rivers, mangrove forest areas, the ocean, and exposure to mining waste originating from the mine’s modified Ajkwa deposition area. It said the ecological losses around the Grasberg mine was attributed to Freeport’s failure to adhere to the environment management plans and environment monitoring plans.

The Supreme Audit Agency’s commissioner Rizal Djalil said that the mining company dumped its waste into forests, rivers and estuaries. He added the agency had received data on the scale of the damage from the National Institute of Aeronautics and Space.

Furthermore He said that PTFI also utilized 4,536 hectares of protected forest for their operations in direct violation of Law No. 19/2004 on Forestry. For that, said Rizal, the auditor body had recommended sanctions for the company to the Environment and Forestry Ministry also the Energy and Mineral Resources Ministry.

PTFI spokesman Riza Pratama said the ministry had imposed administrative sanctions on Freeport in October 2017 for violating the terms of the environment permit.

Environmental Problems

In March 1973, Freeport started an open-pit mine in Ertsberg, a region that had been mined in the 1980s and left a 360-meter deep pit. In 1988, Freeport began to dredge another giant reserve, Grasberg, which is still going on right now.

From the exploitation of these two areas, about 7.3 million tons of copper and 724.7 million tons of gold have been dredged. In July 2005, the Grasberg mine pit has reached a diameter of 2.4 kilometers on an area of ​​499 ha with a depth of 800m.

It is estimated that there are 18 million tons of copper reserves, and 1,430 tons of gold reserves remaining until the mine closure plan in 2041. Other violations are environmental damage.

This has an adverse impact on the ecology of Papua and public health. Even today the snow on the peak of Mount Jaya Wijaya has also melted due to pollution of this waste waste.

In addition, the Freeport mine site at the top of the mountain is at an altitude of 4,270 meters, the lowest temperature reaching 2 degrees Celsius. The processing plant is at 3,000 m, the precipitation in the area is 4,000-5,000 mm, while the foothills receive higher annual rainfall, 12,100 mm and temperatures ranging from 18 to 30 degrees Celsius.

Under these natural conditions, the area under the Freeport mining area has a high degree of vulnerability to landslides. On Oct. 9, 2003, a landslide occurred in the southern area of ​​the Grasberg open pit mine, killing 13 Freeport employees.

The Indonesian Forum for Environment (WALHI) releases landslides due to weak Freeport’s concern for the environment. In fact, they know the location of Grasberg mining is a disaster-prone area due to the topography of the region and the high rainfall.

The collapse and tailings reservoir at Wanagon Lake in 2000 caused the death of four Freeport sub-contractors. An avalanche occurred at the Grasberg mine site on Thursday, October 9, 2003.

Freeport also has disposed of tailings by the category of B3 waste (Hazardous Toxic Substances) through the Ajkwa River. This waste has reached the coast of the Arafura sea.

The tailings that Freeport dumped into the Ajkwa River exceeded the total suspended solid standard allowable under Indonesian law. Freeport’s tailings waste has also polluted the waters of the Ajkwa River estuary and contaminated large numbers of living things and threatened the waters with large amounts of acidic mine water.

From the environmental audit conducted by Parametrix, it was revealed that Freeport’s exhausted tailings were materials capable of producing harmful acidic liquids for aquatic life. Even a number of sensitive aquatic species in the Ajkwa river have become extinct due to Freeport tailings.

According to Greenomics Indonesia calculations, the cost needed to restore damaged environments is Rp67 trillion. However, if calculated from the estimated environmental costs to be incurred, Indonesia harmed about Rp 31 trillion.

Several media and non-governmental organizations revealed that Freeport mining activities have caused severe environmental damage. This has violated Law no. 23 of 1997 on Environmental Management.

Some of the environmental damage revealed by media and NGOs is that Freeport has killed 23,000 ha of forest in the tailings deposition area. Changing the landscape due to erosion and sedimentation. River overflow due to silting due to tailings deposits.

Recently, Indonesian Government through state-owned aluminum smelter operator PT Indonesia Asahan Aluminium has been discussed to acquire 51 per cent PTFI’s shares. President Joko Widodo has asked the deals should be ended on April, 2018.

Several analysts said, there are potential risks to be faced both economically, politically and socially if the negotiations would drag out longer. Lot of challenges hampered Indonesian Government to solved the deal.

The government has stuck to its guns, aiming to complete negotiations with Freeport, focusing on five underlying issues, by Oct. 10. Freeport has also stubbornly refused to budge, and as of this writing there has been no significant progress in negotiations.

Currently, Freeport has asked for a guarantee on rights to mine Grasberg up to 2041 before committing to billions of dollars of planned underground mine investments and a second Indonesian copper smelter.

Likely caving in to external pressure, the government has agreed to extend PTFI special mining business permits until June 30, 2018 and its subsequent export license by Feb. 15, 2019.

The Phoenix, Arizona-based company has been in lengthy discussions with the government of Southeast Asia’s largest economy over a number of issues that will affect its operations in the world’s second-biggest copper mine.

Indonesia’s mining policy requires, among other, Freeport to divest its stake up to 51 per cent to local entities, build a new smelter to add value to its export commodities, if they wish to extend the existing 30-year contract.

The U.S. mining giant ships about two-thirds of the copper concentrate it produces from the Grasberg mine, while keeping the remainder to be processed domestically. This year Freeport targeting to produce copper 3.9 Billion lbs, gold: 2.4 Million ozs and Molybdenum 91 Million lbs.

US$1: Rp13,700