A Complete Guide to Groundwater Extraction Permits (SIPA) in Bali for Foreign Businesses

Groundwater well permits (SIPA) in Bali are mandatory for commercial, industrial, and high-volume residential usage (over 100m3 /month) to combat over-exploitation and seawater intrusion. Small, low-volume residential wells (typically under 100m3 /month) often do not require permits.

It allows businesses to legally extract groundwater, a resource that is essential for daily operations such as water supply in hotels, villas, guesthouses, and restaurants.

Before the recent regulations, businesses in Bali like villas and small hotels were typically required to only have NPWPD AT (Nomor Pokok Wajib Pajak Daerah Air Tanah), an identity number for groundwater tax purposes, issued by local authorities.

However, due to increased scrutiny and issues related to the sustainability of water resources, the Indonesian Ministry of Energy and Mineral Resources (ESDM) now requires business owners, especially those running accommodations, to obtain a SIPA based on Ministry of Energy and Mineral Resources Regulation No. 14 of 2024 concerning the implementation of groundwater exploitation permits and groundwater use approvals.

Therefore, every businessman, whether an Indonesian citizen or, especially, a foreign citizen who wants to establish a company in Indonesia, must have a SIPA as stipulated in Indonesian legislation.

Key Points About SIPA in Bali

• Requirement: If you own a business like a villa, hotel, or restaurant, you need a SIPA permit.
• Threshold: Homes that use less than 100 cubic meters of water per month usually don’t need a permit.
• Environmental Impact: The regulations aim to reduce over-extraction of water and prevent saltwater from entering fresh water sources.
• Process: To get a permit, a geological survey is needed.
• Validity: The SIPA permit is valid for 5 years.

Why Is SIPA Important for Business Owners?

For foreign entrepreneurs operating in Indonesia, especially in Bali, it is now mandatory to hold a SIPA, especially in industries such as accommodation (hotels, villas, guesthouses, etc.) or any business that requires significant groundwater usage.

Failure to comply with these regulations may result in hefty fines and penalties.

The government has been increasingly vigilant about groundwater use, especially in the face of Bali’s growing tourism industry and the associated strain on local water resources.

The penalty for not obtaining a SIPA can amount to IDR 50 million, making compliance crucial for businesses looking to stay operational in the long term.

The Requirements for Obtaining a SIPA in Bali

Applicant Documents

• Identity Card (KTP) and Tax Identification Number (NPWP) of the business owner or company director;
• OSS Username and Password;
• Company Documents:
  • Deed of Establishment (AKTA);
  • Business Identification Number (NIB);
  • Company Tax Identification Number (NPWP) – if submitted under a company name.
• Company letterhead;
• Copy of Land Ownership Certificate (SHM) or Land Lease Agreement (if the location is leased).

Technical Documents

• Bore well location map, including GPS coordinates (make sure that your location is not in red zone);
• Lithology cross-section and bore well construction drawings;
• Statement of commitment to construct an infiltration well;
• Statement confirming that bore well construction has been completed;

Technical Report

• Planned water usage (in cubic meters per day).
• Intended use of the well.
• Photographs of the bore well opening and water meter. Photos must be taken using the GPS Map
• Camera application.
• Bore well data:
  • Borehole diameter.
  • Construction pipe diameter.
  • Bore well depth.

Additional Documents

• A statement confirming the month and year when groundwater usage commenced.

Documents listed in numbers 2 – 4 are documents that BaliEasy can help you to prepare if you want to create a SIPA with us.The processing fee for SIPA in BaliEasy is IDR 25.000.000.

Groundwater Registration Process

• Document Preparation
  Gather all necessary documents, including proof of land ownership and applicant information. We will ensure that these documents fulfill the required criteria.
• Application and Review
  Submit your application along with the supporting documents. The Geological Agency will review and evaluate the application, including assessing groundwater availability and potential environmental impacts.
• Drilling
  Once approval is granted, drilling can commence.
• Feasibility Review
  After the drilling is completed, submit the project for feasibility assessment. The Geological Agency will evaluate the groundwater usage feasibility and review any environmental effects.
• Approval or Rejection
  The Geological Agency will make a decision to either approve or reject the application. If approved, a groundwater license will be issued.
• Monitoring
  After the license is granted, the Geological Agency will continue to monitor the operation to ensure compliance with all regulations.

Obligations of Groundwater License Holders

Groundwater extraction license holders are required to:

a. Follow the technical requirements outlined in the Groundwater Extraction Permit and the technical guidelines set by the Minister.

b. Carry out the drilling or excavation of groundwater exploration within one year from the date the permit is issued.

c. Install a water meter on the outlet pipe of the borehole or groundwater well.

d. Build a recharge well or infiltration well.

e. Construct a monitoring well equipped with an Automatic Water Level Recorder (AWLR) to measure groundwater depth, as per the technical guidelines, within two years from the permit issuance.

f. The construction of monitoring wells must meet the following criteria:

• One monitoring well for every fifth borehole or groundwater well on the site.
• One monitoring well for locations extracting 5,000 m³ or more of groundwater per day.

g. Protect and maintain the functionality of groundwater resources.

h. Prevent environmental damage caused by groundwater extraction activities.

i. Ensure that groundwater extraction does not disturb the water supply used for the basic daily needs of surrounding communities.

j. Submit technical reports every six months to the Ministry, Governor, or Mayor, depending on the jurisdiction, through the Online Licensing Application for extraction volumes exceeding 10 m³ per day.

k. These reports should include:

• A monthly summary of groundwater extraction volumes.
• Water quality analysis results every six months.
• Monthly groundwater depth measurements.

l. Implement water-saving practices and control groundwater pollution.

m. Provide access to authorized government officials from the Ministry of Energy and Mineral Resources, local government, and related agencies for inspections of groundwater exploration and extraction wells.

n. Report to the Ministry, Governor, or Mayor if any issues arise during groundwater extraction that could harm health, safety, or the environment.

o. Take corrective action and restore any environmental damage caused.

p. Pay applicable non-tax state revenues and other financial obligations according to the relevant regulations.

SIPA Validity and Renewal

Additionally, the SIPA (Groundwater Extraction Permit) is granted for a period of 5 years.

The permit can be renewed, but the application for renewal must be submitted at least 6 months before the current permit expires and no later than 2 months before the expiration date, in accordance with Article 12, Paragraph (1) and Article 25, Paragraph (1) of the Minister of Energy and Mineral Resources Regulation No. 14/2024.

How Much Does it Cost to Obtain a SIPA?

The cost of obtaining a SIPA in Bali can vary depending on the volume of water used by the business.

However, as a standard guideline, BaliEasy has estimated that the SIPA processing fee typically ranges around IDR 25 million for a typical villa or accommodation-based business.

This fee includes:

• The permit cost itself.
• The installation of the water meter.
• The photo documentation of the GPS coordinates.

Additional costs might arise based on the complexity of the installation or the required technical revisions, but this gives a general idea of the investment required to ensure your business remains compliant.

Important Considerations

• Strict Regulations: ESDM manages the rules to ensure sustainable water use.
• Enforcement: While the regulations exist, enforcement can vary. Illegal large-scale water extraction is a major focus for local authorities.

SIPA vs. NPWPD AT

Previously, businesses in Bali could operate with just the NPWPD AT for groundwater extraction.

However, with the stricter regulations surrounding groundwater usage and the increased focus on sustainable water practices, businesses, particularly in the accommodation sector, are now required to obtain both the NPWPD AT and the SIPA to remain fully compliant.

While the NPWPD AT is issued by the regional authorities, SIPA is granted by the Ministry of Energy and Mineral Resources (ESDM), which makes the process a bit more complicated and time-consuming.

Non-compliance with the SIPA requirement can result in significant fines (up to IDR 50 million) and jeopardize the operation of the business.

Conclusion

As the tourism and hospitality sectors continue to thrive in Bali, ensuring that your business complies with all regulations is crucial for long-term success. Obtaining a SIPA is not only a legal requirement, but it also demonstrates a commitment to responsible groundwater management.

For foreign entrepreneurs operating in Bali, BaliEasy offers a streamlined service for obtaining SIPA permits, ensuring that all documents are properly prepared and submitted, and that your business stays compliant with the latest regulations.

Contact BaliEasy today for more information on how we can assist you in securing your SIPA and other necessary permits for running a successful business in Bali.