July 25, 2018 / 11:26 AM / 24 days ago

Indonesia govt asked to recalculate Freeport mine damage

JAKARTA, July 25 (Reuters) - Indonesia's parliament has asked the government to recalculate damage to the environment from the giant Grasberg copper mine operated by the local unit of Freeport McMoRan Inc, the environment ministry said.

A 2017 report by Indonesia's Supreme Audit Agency (BPK) calculated that Freeport's decades-long operations at the mine in Indonesia's remote easternmost province of Papua had caused environmental damage worth $13.25 billion.

That damage, it said, was largely a result of tailings from the mine that had extended beyond previously agreed limits and which had polluted coastal areas.

The audit also said Freeport Indonesia (PT FI) had missed royalty payments, cleared thousands of hectares of protected forest and began mining underground without environmental clearance.

The environmental issues have presented problems for Freeport and Indonesia, whose state-owned mining holding company, PT Inalum, hopes to finalise a $3.9 billion deal to acquire a majority stake in Grasberg this year.

In a meeting with Environment Minister Siti Nurbaya on Tuesday, parliament urged the minister to "ensure that PT FI fulfils governmental administrative penalties" in accordance with the law, the ministry said in a statement late on Tuesday.

"Commission VII asks the Environment Minister to calculate the value of environmental losses resulting from damage and pollution from PT FI operations, as per the findings of the BPK," Commission VII chairman Gus Irawan Pasaribu said, according to the statement.

Jakarta-based spokesmen for PTFI and Inalum did not immediately respond to a written request for comment.

Freeport CEO Richard Adkerson said on a call with analysts on July 12 the company had been "working very closely" with the environment ministry and had "received assurance that we will find a resolution of the environmental issues that will be acceptable for all parties. So we're very encouraged by that."

Since then he said Freeport had "entered into very productive discussions with the ministry and are making progress with the ministry in addressing these issues and working towards a resolution that we do not expect and the ministry does not expect to adversely affect our operations."

Parliament also urged the ministry to "conduct environmental risk analysis and environmental audits on a regular basis", and plans to hold meetings with the ministries of mining and the environment on the matter.

A spokesman for the environment ministry declined to comment further on the parliament request or provide and estimate on how long this process could take.

Indonesia's mining minister said earlier this month the environmental matters must be resolved before his office could issue a new mining permit for PT-FI up to 2031.

Inalum CEO Budi Gunadi Sadikin told parliament on Monday that "regarding the environment, we told Freeport 'the past problems are your sins'. In future we will take responsibility together."

Sadikin added the environmental damage from Grasberg was a shared responsibility as the government already held a 9.36 percent stake in the mine.

Sadikin said a forestry permit for the mine still needed to be issued, and "the 185 trillion rupiah ($12.80 billion) from tailings damage still needs to be cleared up" although he was confident that all the environmental problems could be resolved.

There are 13 of 48 sanctions related to the environmental audit that have not been met yet, according to the environment ministry.

In April, Freeport shares fell to a four-month low after the environment ministry announced tough new rules intended to comply with the BPK audit, just before the company announced its first quarter earnings. ($1 = 14,455.0000 rupiah) (Reporting by Bernadette Christina Munthe Additional reporting by Wilda Asmarini Writing by Fergus Jensen; editing by David Evans)

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