Lapindo completely liable, says govt

Lapindo completely liable, says govt

The government will not allocate any funding in the 2007 national budget for the Sidoarjo mud-volcano catastrophe in East Java, despite it having being declared a national disaster, a senior official from the Finance Ministry said Friday in Jakarta.

Referring to a presidential decree issued in connection with the disaster, the ministry’s secretary-general, Mulia P. Nasution, said the decree stipulated that the calamity was “the full responsibility of Lapindo.”

PT Lapindo Brantas was drilling an exploratory gas well when the mud volcano erupted on May 29, inundating a vast area near Sidoarjo with hot, toxic mud.

The company is a subsidiary of PT Energi Mega Persada (EMP), Indonesia’s second largest publicly listed oil and gas firm. EMP is owned by the Bakrie Group, which is controlled by the family of Coordinating Minister for People’s Welfare Aburizal Bakrie.

Given the scale of the calamity, President Susilo Bambang Yudhoyono issued a decree in September setting up a national team to coordinate the handling of the disaster. The team has been set up for an initial term of six months, which can subsequently be extended. All of the team’s costs are to be borne by Lapindo.

The pressure of the mud on an underground gas pipeline resulted in its rupture and an ensuing explosion late Wednesday. The blast killed 11 people and injured dozens of others. To date, the mud has inundated 400 hectares of industrial land, farmland and residential areas, forcing 12,000 people to seek refuge. It has also cut an economically vital toll road into Surabaya, and is threatening rail lines.

Mulia’s statement comes on the heels of increasing controversy over who will shoulder the costs of the disaster after EMP sold its entire stake in Lapindo to a third party. This sale, however, is subject to approval by the Capital Market Supervisory Agency (Bapepam).

Vice President Jusuf Kalla said previously that Lapindo had to accept full responsible for the disaster. Aburizal also said the same, whoever eventually ended up owning Lapindo. The Bakrie Group has vowed to provide financial support to Lapindo to enable it to cover the cost of handling the disaster.

Mulia stressed that the government had not allocated any special funding in either the 2006 budget revisions or in the approved 2007 budget for the mudflow disaster, nor did it plan to do so.

“Even if we were to revise the budget, or use emergency contingency funds, this would still have to be approved by the House of Representatives,” he said.

The 2006 budget contains an allocation of Rp 2.9 trillion for disaster relief and emergency social support, most of which is being used to fund reconstruction work in the Yogyakarta and Pangandaran, West Java, areas after they were respectively devastated by an earthquake and tsunami earlier this year. Meanwhile, the 2007 budget contains an emergency funding allocation of Rp 2 trillion.

Separately, Bapepam director Fuad Rachmany said his agency was still collating information on EMP’s decision to sell Lapindo to Freehold, a British Virgin Islands-based firm.

Bapepam had previously overruled EMP’s decision to sell Lapindo to another firm, Lythe, which is also affiliated to the Bakrie Group.

Fuad added that Bapepam would prefer to meet with EMP executives, rather than Freehold executives, for the purpose of clarifying and discussing the matter.

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