Abandonment and Site Restoration (ASR) Funding Scheme in the Context of Environmental Protection after Upstream Oil and Gas Business Activities from an Economic Law Perspective

This study focuses on the Abandonment and Site Restoration (ASR) Funding Scheme and its significance in environmental protection following upstream oil and gas activities. ASR activities have a substantial impact on the environment, necessitating an adequate funding scheme to ensure both environmental preservation and economic sustainability in the oil and gas sector. The presence of comprehensive regulations governing the implementation of ASR activities is crucial, as they address not only the restoration of environmental functions but also accountability and financing. Failure to address these concerns could lead to future problems, particularly when operations are completed and oil and gas companies have departed from Indonesia. This research, conducted through legal analysis, examines the implementation of ASR activities in accordance with international and Indonesian laws and regulations, while also identifying the obstacles encountered in their execution. The study employs normative legal research methodology, utilizing secondary data such as laws, regulations, and books. The findings of this research elucidate the funding scheme for post-operation ASR activities, including the ASR funds outlined in SKK Migas Decree No. KEP-OO87/SKKMAO0O0/2018/SO, which provides guidelines for Abandonment and Site Restoration Work, and the subsequent fund arrangements following upstream oil and gas operations as stipulated in Permen ESDM No. 15 of 2018.


Introduction
Upstream oil and gas business activities are carried out based on the Cooperation Contract.A Cooperation Contract is a Production Sharing Contract or other form of cooperation contract in Exploration and Exploitation activities that are more beneficial to the State and the results are used for Site Restoration (ASR) procedures in Indonesia?And second, which regulations are in place to enforce the obligation of reserving funds for Abandonment and Site Restoration (ASR) activities within the upstream oil and gas industry?

Methods
In writing this article, the approach method used is a descriptive-analysis approach with a type of normative juridical research (literature law research).[12] In this case, the author conducts research by analysing and explaining related laws and regulations and legal materials [9] related to drilling activities and post-oil and gas mining operations in terms of cooperation contracts in the upstream oil and gas industry whose contract period will expire does not regulate the obligation of cooperation contract contractors to carry out post-mining operation/abandonment activities and Site Restoration (ASR), including the obligation to reserve ASR funds.

Abandonment and Site Restoration Arrangements after the issuance of Guidelines for Abandonment and Site Work Procedures Revision 01 Number PTK-040 /SKKMA0000 / 2018/S0
The definition of ASR is stated in the Guidelines for Work Procedures for Abandonment and Site Revision 01 Number PTK-040 / SKKMA0000 / 2018 / S0 which is a guideline for planning, reserve funds, implementation, use of funds and reporting from the implementation of Abandonment and Site Restoration activities.In Article 5 number 5.1 of PTK ASR, it is stated that Abandonment and Site Restoration or Post-Operation Activities are activities for permanent well closure, termination of operation and eliminating the ability of Production Facilities and supporting facilities to be operated again including permanent demolition, as well as carrying out environmental restoration in WK in Upstream Oil and Gas business activities.
In the 1970s in Indonesia, Abandonment and Site Restoration (ASR) arrangements were still not explicitly regulated, there was only an obligation to abandon installations or production facilities that were no longer used, (Weda Suputra et al., 2019) 4), provisions are stated for the demolition of mining installations that are no longer used within a period determined by the Government of Indonesia, which in this case is the Director General, and the prohibition on entrepreneurs to leave wells that are no longer used before taking appropriate actions.(Fajri, 2020;Ladouceur et al., 2023) However, in its development in 2018 there is an obligation to abandon installations or production facilities that are no longer used, also regulated in Decree Number: KEP-0087 / SKKMA0000 / 2018 / S0 concerning Guidelines for Abandonment and Site Work Procedures Revision 01 concerning Guidelines for Abandonment and Site Restoration Work Procedures Number PTK-040 / SKKMA0000 / 2018 / S0 (PTK ASR) Article 1.2 PTK ASR states that Cooperation Contract Contractors (KKKS) must abandon Production Facilities and other supporting facilities that have been used for Upstream Oil and Gas Business Activities, and Site Restoration to the area of Upstream Oil and Gas Business Activities at the time of cessation of production and Production Sharing Contract which in one section mentions the obligation for the Contractor to carry out environmental rehabilitation and dismantle all installations and equipment before abandonment, which is carried out in accordance with the requirements in laws and regulations.This obligation is carried out when the contract expires or is terminated, or part of the working area is returned, or for closed and abandoned fields.
The obligation to implement ASR and reserve funds for postoperative restoration preparation or ASR funds only existed after 2008, after the issuance of Government Regulation No. 35 34 The arrangement of ASR funds as part of the implementation of ASR activities is in more detail regulated in one of the clauses in the Production Sharing Contract or Cooperation Contract, which in one section states that the Contractor has the obligation to allocate in the budget each year the estimated amount of costs that will be required for activities Environmental rehabilitation dams close and leave wells that are not productive (well abandonment).This allocated fund will be used for cleaning and environmental rehabilitation, if the contract is terminated or expires and is not renewed then the funds collected will be transferred to SKK MIGAS which will then have the responsibility to carry out environmental rehabilitation.and dismantle all installations and equipment before abandonment, which is carried out in accordance with the requirements in laws and regulations, the provisions in this Obligation Guidelines are carried out when the contract expires or is terminated, or part of the work area is returned, or for closed and abandoned fields.The lack of clear arrangements related to the implementation of ASR activities causes PSC Contractors to still avoid making payments for ASR fund reserves.According to the author, in this case, there is a need for a clear regulation regarding the obligation of the PSC Contractor (KKKS) to carry out ASR activities which include activities to reserve funds for work areas that have been completed in exploration or post-operation, where this arrangement can be stated in a form of law.

Arrangement for the Implementation of Abandonment and Site Work Procedures based on the Revised Abandonment and Site Work
In PTK ASR CHAPTER IV concerning the Implementation of ASR Activities explained in detail the stages of implementation, in essence there are obligations of KKKS in its implementation as follows: 1. KKKS submits a draft proposal for the implementation of ASR to the Deputy in charge of planning which then the draft must cover 11 aspects such as; technical studies, K3LL risk assessments, asset validation, maintenance inspection reports and lastly, review of ASR activity implementation options, review of technical methods of implementing ASR activities, implementation time and schedule, draft implementation control and supervision plans, recovery programs, cost studies, and identification of formalities and legal aspects.2. Proposals for ASR activities are given to the Director General through SKK Migas for approval, and proposals for costs and use are given to the Deputy in charge of planning for approval, this is done ensuring that the obligations of ASR activities by the KKKS are known to the state.3. KKKS that has obtained approval for ASR activities can immediately carry out ASR activities in this case activities on the option of Dismantling Production Facilities and supporting facilities and closing wells in accordance with the provisions of the Indonesian National Standard 13-6910-2002 or regional standards or international standards or good engineering principles.

Regulations on the implementation of the obligation to reserve Abandonment and Site Restoration (ASR) funds in upstream oil and gas business activities
Then in the event that the obligation to reserve funds is regulated in the Abandonment and Site Restoration Work Procedure Guidelines Number PTK-040 / SKKMA0000 / 2018 / S0 (PTK ASR is contained in PTK ASR Chapter III Dana ASR, in this case the preparation of the ASR Fund Reserve Report that must be fulfilled by KKKS based on the PTK referred to above, includes: 1. Prepare a report on the provision of ASR Funds for each field in a Working Area for: 1) Existing assets 2) Assets under construction, 3) Assets to be built according to Plan Of Development (POD) 2. The ASR Fund reserve report is prepared in accordance with Form ASR-1 and Form ASR-3 which include: 1) ASR activity plan 2) ASR cost estimation calculation 3) ASR Fund Reserve every semester 3.In making the calculation of ASR cost estimates use the following assumptions: 1) ASR is carried out for all assets that require demolition activities against all production facilities and other supporting facilities.2) ASR will be implemented when the production period stops in a field.
3) The calculation of the estimated cost of ASR does not take into account exploration wells.

4 ) 6 . 5 )
Cost escalation calculation escalated to ASR plan year 4. The cost components of ASR include: 1) Engineering design costs 2) Licensing and regulatory compliance fees 3) Well closure costs, other than exploration wells 4) Disassembly costs 5) Transportation costs 6) Storage costs 7) Site restoration costs 5. Onshore demolition includes the demolition of the following facilities: Offshore demolition includes the demolition of the following facilities: 1) Platform (topside, jacket, platform facilities) Miscellaneous facilities[15] 7. ASR Fund Reserve is carried out by KKKS every semester by depositing funds in units of United States Dollars to the Joint Account during the collection period.8.The annual ASR Fund reserve is determined based on the last ASR fee divided by the ASR fund collection period with the following formulation: Specified Year ASR Fund Reserve = ASR Cost Estimation ± Adjustments -SAR Fund Balance Remaining ASR Fundraising Period of 2004 concerning Upstream Oil and Gas Business Activities (hereinafter as PP No. 35 of 2004) which in Article 36 states the obligation for the Contractor to allocate funds for post-operation activities Upstream Business Activities, Since the start of the exploration period and implemented through work plans and budgets.In addition, in Article 11 paragraph (1) of Government Regulation Number 79 of 2010 concerning Refundable Operating Costs and Income Tax Treatment in the Upstream Oil and Gas Business Sector (hereinafter as PP No. 79 of 2010) it is stated that what is included in operating costs are exploration costs, exploitation costs, and other costs.Other costs referred to in article 11 paragraph (1) of PP No. 79 of 2010 are the costs of post-operation activities of upstream Oil and Gas business activities.

Procedure Guidelines 01 Number PTK-040 / SKKMA0000 / 2018 / S0
Regulation for the implementation of ASR activities through Decree Number: KEP-0087 / SKKMA0000 / 2018 / S0 concerning Guidelines for Abandonment and Site Work Procedures Revision 01 concerning Guidelines for Abandonment and Site Restoration Work Procedures Number PTK-040 / SKKMA0000 / 2018 / S0 (PTK ASR) which was only enforced in 2018, as well as clauses contained in the Cooperation Contract or Production Sharing Contract Since 2008, which states the obligation to carry out environmental rehabilitation