VZCZCXRO5885
PP RUEHCHI RUEHDT RUEHHM
DE RUEHJA #7839/01 1721039
ZNR UUUUU ZZH
P 211039Z JUN 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC PRIORITY 6154
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 9643
RUEHWL/AMEMBASSY WELLINGTON 0904
RHHMUNA/HQ USPACOM HONOLULU HI
RUEHGP/AMEMBASSY SINGAPORE 5355
ZEN/AMCONSUL SURABAYA

UNCLAS SECTION 01 OF 04 JAKARTA 007839 
 
SIPDIS 
 
FROM AMCONSUL SURABAYA # 1663 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EINV EPET PGOV ID
SUBJECT: East Java: Toxic Mudflow Forces Evacuations; 
Possible Political Ramifications for Minister Bakrie 
 
¶1. (SBU) SUMMARY: A gas well being drilled 40 yards 
from the main north south transportation corridor in 
East Java, the Surabaya - Gempol toll road, fractured 
and has been spewing hot, potentially toxic mud 12 
miles south of Surabaya in Porong, East Java since May 
¶29.  The rate of mud flows have increased from the 
5,000 to the current 25,000 cubic meters per day 
forcing the evacuation of 4,000 residents from four 
villages near the well and the closure of businesses 
and has disrupted land transportation in East Java by 
forcing the closure of a major portion of the toll 
road.  The mud may be emitting sulphuric acid gas and 
hundreds of local residents have reported respiratory 
problems, including three deaths.  The drilling company 
reports repairs to the well may take as long as four 
months. Minister for Social Welfare, Aburizal Bakrie, 
owns a controlling interest in the well through the 
Bakrie Group and has acknowledged responsibility for 
damage claims. Most local commentators question whether 
he or his company will ever be held legally 
responsible.  Many residents have been left homeless, 
jobless, and the local underground drinking water 
supply has been contaminated.  There is yet no 
coordinated effort by local or national government 
leaders to assist local residents affected by the 
mudflow.  Investigations are on-going as to 
circumstances surrounding the authorization of a well 
so close to a densely populated area and an important 
roadway.  Competition spurred by decentralization among 
local governments to attract investment and their lack 
of expertise in evaluating the impact of such projects 
may have played a role.  END SUMMARY 
 
A Flood of Hot, "Toxic Mud" 
-------------------------- 
 
¶2. (SBU) A gas well being drilled 40 yards from the 
Surabaya - Gempol toll road fractured and began spewing 
hot, potentially toxic mud on May 29 in Siring village, 
Porong sub-district, Sidoarjo Regency, East Java (about 
12 miles south of Surabaya.)  The foul smelling mudflow 
flooded the toll road disrupting traffic on the main 
north-south route between Malang and Surabaya.  The 
drilling company, PT. Lapindo Brantas (LB), has been 
unable to stop the mud gusher which has increased from 
the initial 5,000 cubic meters to 25,000 cubic meters 
of mudflow per day, according to the Ministry of 
Environmental Affairs.  More than 200,000 cubic meters 
of mud and white smoke have already discharged from the 
breached well enveloping over 1,200 acres of land area, 
hundreds of homes and dozens of businesses in the 
Porong area.  The mud has forced the evacuation of 
approximately 4,000 local residents from four nearby 
villages filling traditional markets, schools and 
government buildings in neighboring villages with 
internally displaced persons (IDPs).  Many nearby 
businesses have been forced to close and transportation 
of goods from important manufacturing areas get to 
Tanjung Perak port in Surabaya has been disrupted. 
 
How Toxic is Toxic? 
------------------- 
 
¶3. (SBU) There are conflicting reports as to the level 
of toxicity of the mud.  Dr. Mukono, a professor at 
Surabaya  Airlannga University, tested the mud and gas 
emitting from the well and reportedly found sulphuric 
acid (H2S), Hydrocarbon gas (HC) and Nitrous Oxide 
(NO2).  He told local newspapers to warn the public to 
stay far away from the well site.  Government reports 
of mud tests found toxicity levels below regulatory 
maximums.  Oil and Gas Regulatory Body (BP Migas) 
claimed that results from their Bogor laboratory tests 
show that the mud is not categorized as a dangerous 
substance (B3) and it has been "animal tested" (no 
further details).  The head of the local environmental 
impact agency (Bapedal), Hartoyo, reported that local 
laboratory tests show the mud is not dangerous to 
people or the environment. At the same time, he warned 
people to avoid the mud because there could be a 
possible fluctuation in the sulphuric acid content in 
the mud to dangerous levels.  Hasan Basri, head of the 
Sidoarjo Regency Environmental Department said that the 
amount of sulphuric acid content in the mud was 
 
JAKARTA 00007839  002 OF 004 
 
 
decreasing to "tolerable levels".  Dr. Eddy Kustanto, 
head of the Sidoarjo Regency Health Department told 
ConGen he could not "officially confirm" the existence 
of sulphuric acid in the mud, but that it smelt "very, 
very strong." 
 
¶4. (SBU) Many residents living in villages near the 
drilling site village are complaining of respiratory 
difficulties after inhaling foul-smelling gas from the 
mudflow. They are also suffering from headaches and 
stomach pain. Bhayangkara Hospital in Porong has 
treated 782 residents for respiratory problems related 
to the mudflow, of which 72 were hospitalized. 
Kustanto said that at least 14 other nearby residents 
were evacuated for medical treatment due to respiratory 
problems, three of whom reportedly died from 
complications.  The mud has also contaminated ground 
water and local irrigation well systems leaving local 
residents with no potable water.  The mud flows are 
near the Porong River which, if reached, could 
contaminate drinking water for more densely populated 
areas in South Metro Surabaya. 
 
High Level Attention, Limited Action on Ground 
--------------------------------------------- - 
 
¶5. (SBU) There have been many statements of outrage and 
support by local and national politicians but little 
has materialized in the form of support for displaced 
residents.  The President has ordered a "full, fast and 
serious" investigation into the operations of LB. East 
Java Police Criminal Investigation Division (CID) has 
questioned 27 people, including expert witnesses. The 
investigation process is being monitored by the 
Indonesian National Police (Polri), and in particular, 
they are looking at possible criminal violations of 
environmental regulations in both the licensing of the 
well by local officials and/or its operation by LB. 
 
¶6. (SBU)  East Java Governor Imam Utomo and his 
technical advisors met June 19 with Purnomo 
Yusgiantoro, Minister of Energy and Mineral Resources 
to urge a rapid solution to this growing environmental 
and commercial disaster.   Separately, Minister for 
Environmental Affairs, Rachmat Witoelar, threatened to 
terminate the operation of LB in East Java but later 
backed off this statement saying his ministry has no 
authority to order Lapindo to halt its operations, 
asides from giving a recommendation to do so to the 
Energy and Mineral Resources Ministry and the Oil and 
Gas Regulatory Body (BP Migas), which issued the 
exploration license.  Governor Utomo issued a strong 
warning that he expected LB to cover all financial 
losses to local residents and noted that the provincial 
government would not be picking up the bill.  The 
Sidoarjo Regency government has already spent 
approximately USD 2,000 from local emergency funds to 
assist its residents. 
 
Minister of Social Welfare Putting Locals on Welfare 
--------------------------------------------- ------- 
 
¶7. (SBU)  One possible reason Environment Minister 
Witoelar tempered his initial aggressive position 
against the drilling company may be that LB is a 
subsidiary of PT Energi Mega Persada Tbk (EMP), which 
is controlled by Coordinating Minister for Social 
Welfare, Aburizal Bakrie.  EMP is the designated 
operator of LB and owns a 50% participating interest. 
Other LB shareholders are Medco (32%), a publicly 
traded Indonesian oil exploration company and 
Australian based Santos (18%). EMP purchased its 
participating interest in LB in the mid-1990's, and by 
2004, built LB to be the single largest supplier of gas 
to the East Java PGN's (State Gas Company) distribution 
network. According to EMP's 2005 annual report, last 
year LB produced almost half of EMP's total gas 
production. LB is one of EMP's most important sources 
of revenue. Closing down the LB's operations could 
create other problems, such as a gas shortage for 
national electricity generating company PLN.  In June 
19 public statements, Bakrie took responsibility for 
the mudflows caused by the well and referred 
compensation claims to his brother Nirwan at the Bakrie 
 
JAKARTA 00007839  003 OF 004 
 
 
Group.  In a June 20 visit to IDPs in Porong, Vice 
President Yusuf Kalla asked LB to pay compensation to 
the victims of mudflow in Porong and also asked Bakrie 
Group to be responsible for all social impacts of the 
mudflow.  Nirwan Bakrie accompanied Vice President 
Kalla on his visit and distributed USD 532,000 (IDR 5 
billion) to Saiful Illah, Deputy Regent of Sidoarjo. 
 
How did It Start and What Can Be Done? 
-------------------------------------- 
 
¶8. (SBU) The cause of the incident is still disputed. 
The drilling company LB claims that the mudflow was 
triggered by the Yogyakarta earthquake (Note: That May 
27 earthquake was felt in Surabaya but we have heard no 
reports of any other damage.)  Others claim the mudflow 
was caused by gas pressure from the well; the drilling 
equipment failed, fracturing the well thereby allowing 
strong gas pressure to the surface.  Minister of Energy 
and Mineral Resources, Purnomo Yusgiantoro, told Jawa 
Pos that a team from his office has conducted an 
investigation at the site. The team is also 
investigating LB compliance with all environmental 
regulatory requirements with the initial proposal and 
design submitted to the Oil and Gas Regulatory Body (BP 
Migas).  LB claims it followed all regulatory 
procedures and their environmental impact report was 
approved by appropriate government authorities and that 
it followed standard drilling procedures at the well. 
Local LB site manager Budi Santosa admitted that LB is 
having difficulties handling the mudflow. Santosa 
estimated LB will need at least 30 days to repair the 
problem.  More recently LB revised the estimate to 
upwards of 4 months. 
 
¶8. (SBU) Expert teams from Canada and from Alert 
Disaster Control and Abel Engineering Well Control of 
Texas have arrived in East Java and are working to 
determine the cause and a solution to the uncontrolled 
mudflow. LB and the Sidoarjo Regency government have 
taken some actions to manage the mudflow, such as 
excavating a large retaining pond and installing pipe 
and flexible barriers to divert the mud away from 
villages and rivers. LB also has installed 2 kilometers 
of sand dikes to protect the toll road. Meanwhile, the 
Oil and Regulatory Body (BP Migas) is scheduled to 
bring in a "snubbing unit" by June 23 to detect the 
source of the mudflow.  BP Migas estimates it will take 
three to four weeks to install the snubbing unit and 
identify the source of the problem. 
 
Local Citizen Protests 
---------------------- 
 
¶9. (SBU) Complaints and protests from local residents 
and mass organizations have begun. Workers from 
neighboring factories held a demonstration in front of 
LB's office (which were also closed by the mudflow), 
asking for compensation since the mudflow has forced 
their employers to close operations. Local residents 
and social observers are criticizing both the local and 
central governments for being slow to handle the 
mudflow crisis.  The Sidoarjo branch of the PKB 
political party announced plans to launch a class 
action law suit on behalf of local residents.  Former 
President Abdurrahman Wahid met with affected residents 
at an IDP camp on June 18 and urged them to remain calm 
and promised to support them in suing the drilling 
company.  Wahid called on LB to take responsibility for 
the incident and provide compensation to local 
residents and businesses while working to stop the 
mudflow.  Rido Syaiful Ashadi, Director of East Java 
Walhi, a local environmental group, reported that the 
mudflow has become a trigger of social tensions among 
people in the surrounding areas. Residents from one 
village dammed the mud, forcing it in to a neighboring 
village.  Those villagers destroyed the dam causing a 
conflict.  Police are now guarding local villages to 
prevent further clashes. 
 
Does Decentralization Play a Role? 
--------------------------------- 
 
¶10. (SBU) Competition among local governments for 
 
JAKARTA 00007839  004 OF 004 
 
 
investment projects (and personal gain) may have played 
a role as increased decentralization of authority has 
not been matched by an increase in human resources, 
local government capacity or sense of community 
responsibility. ConGen contacts question how a new gas 
well can be drilled in unstable conditions adjacent to 
a densely populated area and immediately adjacent to 
the most important north-south thoroughfare in East 
Java.  Local governments have increasingly been given 
responsibility to approve and control projects in areas 
where they have little to no expertise.  The Porong 
incident and PT Lapindo Brantas, and by extension, 
Minister Bakrie, have come under political fire from 
East Java officials and politicians.  While certainly 
some will use the "toxic mudflows" to personal 
advantage, others have raised the incident as an 
example of a larger systemic problem with the on-the- 
ground implementation of Indonesia's decentralization 
policy.  In a recent discussion with ConGen 
pol/econoff, a National DPR member from East Java 
strongly criticized what he termed the wrong 
interpretation of the "essence" of decentralization. 
In their drive to raise funds, local leaders are 
focused on attracting investment but often either 
ignore or do not have the skills to evaluate the impact 
on the environment, health, education and the local 
residents, especially the most vulnerable.  For now, 
local residents wait for a full investigation, 
compensation, and most of all, for the mud to stop 
flowing. 
 
AMSELEM