Indonesia's KPC denies operating in forest areas

JAKARTA - Indonesian coal miner, PT Kaltim Prima Coal (KPC), has denied operating in protected forest, after an East Kalimantan regency ordered the firm to stop operating in some areas in a dispute over permits and land ownership.

East Kutai regency said on Saturday it had ordered KPC and another coal firm, PT Perkasa Inaka Kerta, to stop operating in these areas because the firms did not have permits from the forestry ministry for 40,000 hectares (98,840 acres) of land.

"Based on prevailing regulations, KPC's mining operation area is definitely not a forest area," the company said in a statement issued late on Monday.

KPC said that based on its contract of work, the authority to stop mining rested with the central government, represented by the mining and energy ministry.

"KPC has been conferred the status of a strategic national asset by the central government. Hence, KPC is requesting the central government to secure and protect the strategic national asset from any disruption. KPC is also examining its legal options in this endeavour."

The firm, a unit of PT Bumi Resources Indonesia's largest coal miner controlled by the family of chief social welfare minister Aburizal Bakrie, produced 38.9 million tonnes of coal in 2007, or about a fifth of Indonesia's total production.

Bumi Resources has said that its coal production at KPC was not affected by the order and was running normal.

India's Tata Power has 30 percent stake in KPC and another coal mining unit of Bumi, PT Arutmin Indonesia.

Perkasa Inaka Kerta is a unit of PT Bayan Resources Tbk, which aims to produce 9 million tonnes of coal this year and is set to raise US$529 million in an initial public offering.

A push towards greater regional autonomy since the end of the autocratic rule of former President Suharto in 1998 has often prompted companies to complain about having to deal with several sets of bureaucracy and double taxation.

It is often also not clear whether local decrees can be enforced or how they relate to contracts and central government regulations.

Indonesia is the world's largest thermal coal exporter and miners in the Southeast Asian country have gained from strong demand from China and India and record high coal prices.

Indonesia expects to produce 205 million tonnes of coal in 2008, with domestic demand seen at 52 million tonnes and the remainder to be exported, according to energy ministry data. (Reporting by Harry Suhartono, editing by Ed Davies and Lincoln Feast)

REUTERS NEWS SERVICE