Key points in geothermal law

By: Godang Sitompul

After several weeks of deliberations, the House of Representatives on Tuesday passed the geothermal bill into law.

The bill was proposed by the House of Representatives and passed into law after 18 days of debates between the House and the government – making it one of the fastest bills to be approved in the country’s history.

The following are the key points in the geothermal law.

1. The central and regional governments have equal rights to issue licenses and regulations for contractor to explore and develop geothermal resources. The central government holds rights to license, regulate and supervise the exploration and development of geothermal resources in the cross-province areas. If the contract areas are located in a province or regency, the rights to issue license for contractors, regulate and supervise their activities lie with the area’s governor or regent, respectively.

2. The central and regional governments will offer contract areas to investors through open bidding

3. The central and regional government carry out general survey on areas before they are offered to investors. They may appoint third parties to carry out the survey.

4. Licenses allow contractors to carry out exploration, feasibility study and exploitation, but the government may carry out explorations.

5. Contractors can apply for contract areas with a maximum size of 200,000 hectares and they have to gradually relinquish part of the contract areas to the government.

6. Contractors have rights to conduct exploration for 3 years and they are allowed to extend the exploration activities twice for one year each. After finishing exploration, contractors have rights to conduct feasibility study for two years. After completing exploration, contractors have rights to carry out exploitation for 30 years with a possibility to extending the contract.

7. Contractors can sell their stake in the concession

8. Contractors pay taxes, import duties, regional levies, royalty, dead rent and bonus to the government. Non-tax revenues, including royalty, bonus and dead rent, will be shared by the central and regional government based on the 20 percent-80 percent formula with the largest portion going to the regional government. The 80 percent non-tax revenue to be received by the regional governments will distributed among the province (16 percent), the host regency (32 percent) and other regencies in the province (32 percent). The payment of taxes by contractors to the government follows the existing regulation on tax.

9. Contractors have to follow the electricity law in generating power using geothermal steam.