VZCZCXRO8385
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJS #0132/01 3232240
ZNR UUUUU ZZH
R 182240Z NOV 08
FM AMCONSUL SURABAYA
TO RUEHC/SECSTATE WASHDC 0331
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUEHBY/AMEMBASSY CANBERRA 0160
RUEAIIA/CIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI
RUEHJA/AMEMBASSY JAKARTA 0316
RUEHJS/AMCONSUL SURABAYA 0336
RUEHKO/AMEMBASSY TOKYO 0054

UNCLAS SECTION 01 OF 02 SURABAYA 000132 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EAP, EAP/MTS, INR/EAP, EB/ESC/IEC 
 
E.O. 12958: N/A 
TAGS: ECON ID EINV EPET ELAB ENRG PGOV ASEC
SUBJECT: EAST JAVA MUDFLOW UPDATE: AS LAPINDO'S POCKETS EMPTY, 
PRESIDENT WARNED OF LOOMING CRISIS 
 
REF: JAKARTA 2096 (FINANCIAL CRISIS IMPACT ON BAKRIE'S BUMI RESOURCES) 
 
SURABAYA 00000132  001.4 OF 002 
 
 
This message is sensitive but unclassified.  Please protect 
accordingly. 
 
 
 
¶1. (SBU)  Summary:  In a November 11 meeting with the Minister 
of Energy and Mineral Resources, (ESDM), the Sidoarjo Mud 
Management Agency (BPLS) reported that the global financial 
crisis has caused a near stoppage of mudflow mitigation efforts. 
 BPLS Operational Vice Head Hardi Prasetyo told the Minister and 
assembled Department and Bureau Heads that the rainy season flow 
rates in the Porong River offer a vanishing window of 
opportunity.  Every day that BPLS fails to dispose of mud in the 
river due to lack of funds, pressure increases on rain-weakened 
dikes.  There has been a 75% reduction in funding from Lapindo 
Brantas, which is responsible for funding BPLS's mitigation at 
the mudflow's epicenter.  Giving the dikes a one-month failure 
horizon, Prasetyo conveyed Lapindo's suggestion that the 
national budget now be used to avoid a disaster.  Press reports 
based on leaks of this and other meetings continue to emerge. 
Despite pleas from Lapindo, President Yudhoyono reportedly 
remains unwilling to spend public money to hold up Bakrie's end. 
 End Summary 
 
 
 
¶2.  (SBU)  ESDM officials invited visiting U.S. Geological 
Survey (USGS) Scientist Emeritus Dr. Thomas Casadevall, U.S. 
Army Corps of Engineers Scientist, Dr. Michael Sharp, and Congen 
Surabaya Pol-Econ Officer to the Ministry to discuss a USGS 
report on mudflow chemistry and the role of a U.S. mudflow 
advisor to work with BPLS (visit reported septel).  During the 
November 11 meeting in Jakarta, BPLS Vice Head Hardi Prasetyo 
provided the assembled officials with update on operations at 
the site and reported that Lapindo is currently unable to pay 
its obligations as defined in Presidential Decree 14/2007 as 
amended in July 2008.  .  Lapindo is still owned by Coordinating 
Minister for Social Welfare Aburizal Bakrie's PT Energi Mega 
Persada, which is part of the Bakrie Group. 
 
 
 
--------------------------------------------- -------------- 
------------------- 
 
Could the Global Financial Collapse Bring Down Local Dikes? 
 
--------------------------------------------- -------------- 
------------------- 
 
 
 
¶3.  (SBU)  Prasetyo explained that this financial impasse 
created additional risks at the site.  Prasetyo told Minister 
Yusgiantoro that BPLS operational funds have been cut by 75% 
since early October 2008.  BPLS's current operational strategy 
is to pump as much mud as possible into the Porong river year 
round, but to also store some of the 100,000 cubic meters of 
average daily mudflow during the 7-8 month dry season in holding 
ponds adjacent to the epicenter.  This strategy does not remove 
all extruded mud and there is a net gain in the ponds every 
year.  This added weight exacerbates subsidence caused by the 
weakened subsurface.  According to Prasetyo, this method will 
fail at some point, precisely when has yet to be calculated. 
Prasetyo and the Deputy of Operations at the site Mr. Soffian 
Hadi informed the Minister that the dikes could fail in one 
month under current conditions. 
 
 
 
¶4.  (SBU) The ground near the mudflow epicenter is subsiding to 
the northeast, while the Porong river is due south.  Subsidence 
near the epicenter averages 10 centimeters daily.  The sinking 
ground -- in the shape of a widening inverted cone -- means that 
mud must be moved up a steepening slope to relieve pressure on 
earthen dikes protecting nearby villages and infrastructure. 
Between 200-300 dump trucks of fill must be added to the dikes 
each day.  The lack of funds has cut the number of trucks in 
half.  Of an original 200 employees on site, BPLS has let go 81 
and put on hold the planned purchase of seven pumps vital to 
keeping up with rainy season mudflow operations.  Without 
additional pumps, mud will build up in holding ponds without 
means of relieving the pressure. 
 
SURABAYA 00000132  002.4 OF 002 
 
 
 
 
 
¶5. (SBU) After the meeting, Minister Yusgiantoro instructed 
Prasetyo to draft a letter to President Yudhoyono advising him 
of the looming crisis at the mudflow site and conveying 
Lapindo's request that public funds be used for mitigation at 
the epicenter.  November 17 press reports said a similar letter 
was drafted for the Minister of Public Works, but was withdrawn 
on November 3 and never delivered. 
 
 
 
--------------------------------------------- - 
 
Bakrie Must Pay-- At Least For Now 
 
--------------------------------------------- - 
 
 
 
¶6.  (SBU) With no legal judgment against the company, the 
Presidential Decree is still the only legal document that 
attempts to define responsibility at the site.  While 
compensation for victims is to be paid by a holding company 
established for the purpose, PT Minarak Lapindo, funds for 
mitigation at the epicenter must be paid by "PT Lapindo 
Brantas."  There is no mention of specific sanctions for failure 
to comply with the decree.  Nor is there provision for personal 
liability on the part of owners or legal officers of the 
company.  For now at least, according to November 17 press 
reports, President Yudhoyono and Minister of Public Works Djoko 
Kirmanto have rejected the notion that public funds should be 
used.  If the central dikes are breached however, any escaped 
mud will become the responsibility of the Ministry of Public 
Works (MPU) according to the Decree.  (The MPU is responsible 
for all earthworks outside the core dike enclosing the 
epicenter.) 
 
 
 
¶7. (SBU) Prasetyo closed his presentation by suggesting that the 
Indonesian public could get stuck paying later and might rather 
pay sooner to avoid near-term disaster.  Minister Yusgiantoro is 
on record as a critic of Lapindo Brantas in addition to serving 
on the board of directors for BPLS.  The Minister closed the 
meeting by saying that there was much that was "still concealed" 
about the financial arrangements for mud mitigation under the 
presidential decree, and "a great deal people don't know."  The 
Minister added that "this is actually not a technical problem, 
it is a legal problem."MCCLELLAND