Lapindo mudflow, what's up?

National media reported that three SBY-Boediono cabinet members visited the area flooded with Lapindo mudflow in Sidoarjo, East Java on Saturday. They "inaugurated" the piling of a fly over for Porong-Sidarjo toll road. The fly over shall be built because the mudflow cut the route seriously, especially in KM 35. This is one of the costs incurred by the mudflow the State generously pays.

The visiting ministers are Djoko Kirmanto (public works), Gusti Muhammad Hatta (environment), and Fadel Muhammad (fishery). People in East Java have suffered for almost five years due to this mudflow. The cost of the mudflow has been ballooned. Why?

President SBY issued Regulation No. 40/2009 in September 23, 2009 which basically lifted the financial burden off Bakrie's shoulders. The new regulation changed some articles of President Regulation No. 14/2007 about the Sidoarjo mudflow. One of the key articles abolished is Article 15 point 5 where PT Lapindo Brantas, controlled by Bakrie Family, initially bear the cost of handling the mudflow.

Under the new regulation, all the related costs of the mudflow will be sourced from the State budget. Lapindo's obligation is limited to the purchase of land and buildings of the victims pursuant to the new map. Lapindo shall pay 20% upfront, while the balance shall be paid one month before the 2-year house rent expired.

But according to the new regulation, the 20% shall be paid in 2008, 30% in 2009, and the balance will be paid gradually. The State Budget had allocated Rp600 billion in 2007, Rp1.57 trillion in 2008, and Rp1.15 trillion in 2009 for rehabilitation of public infrastructures affected by the mudflow.

The President Regulation No. 14/2007 was actually designed as "burden-sharing scheme" between the State and the Bakrie Group.

SBY initially issued Decree No. 13/2006 about the establishment of national team for the mudflow, supervised by energy minister (Purnomo Yusgiantoro), public works minister, fishery, and environmental affairs plus East Java governor, Brawijaya regional military commander, and East Java regional police chief.

The cost was initially a full responsibility of Lapindo. But President Regulation NO. 14/ 2007 lifted substantially some of the financial burdens from Bakrie's shoulders, especially rehabilitation of public infrastructures and operational costs for the national team (article 14).

So, the mudflow-related costs lifted from Bakrie's shoulders are: Rp2.11 trillion to move the railway line, turnpike, build new highway, and gas pipeline, plus Rp612 billion for construction of a canal to channel the mud to the Porong River, Rp300 billion for dam construction, and operational costs of mudflow handling at about Rp100 billion per annum. How much is that? Rp3.12 trillion or about US$320 million.

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