New Area of Specialization- Mining

A. Mining in the Philippines Overview

The Philippines is one of the highly mineralized countries in the world
with 9 million hectares considered to have high mineral potential. According to
the Mines and Geosciences Bureau, the country is ranked top five in the world
for overall mineral reserves, second in gold and third in copper resources. The
Philippines has untapped mineral wealth worth at least US$840 billion (PhP47
trillion) in gold, copper, nickel, chromite, manganese, silver and iron. This is ten
times the countrys annual gross domestic product (GDP). The Philippines gold
reserves alone can amount to PhP7.36 trillion, (US$16.873 billion) or about 76
percent of the countrys GDP of PhP9.73 trillion in 2011. This amount,
according to the National Statistical Coordination Board (NSCB), is enough to
completely eradicate poverty in the country, which remains the greatest
challenge facing the government.

Mining industry has a great potential to be a key growth sector in the

Philippines given the countrys vast and rich mineral resource deposits.
Mining can spur economic growth and generate employment opportunities
in local communities as mining companies invest in infrastructure, utilities
and other facilities within the mining sites. It can likewise contribute to the
country's foreign-exchange earnings through exports and bring much
needed revenues to the government through taxes and fees paid on mining
and other related activities.
The World Bank is implicated in the expansion of mining in the
Philippines. Despite historical problems with mining and a legacy of 800
abandoned mines, the Bank was one of the major actors influencing the
liberalized Mining Act of 1995. More recently, it has played a crucial role in
sponsoring and promoting the adoption of the National Minerals Policy, the
Mineral Action Plan and the revitalization of the mining industry. In failing to
address the negative impacts of mining plans on the poor and marginal, the
Bank is failing in its duty both to assist with the countrys steps to

sustainable development and is failing to abide by obligations to its own

mandate and obligations under international human rights law.

References: Report of a Fact-Finding Trip to the Philippines 2006

Senate Economic Planning Office Policy Brief (2013)
B.

History of Mining Laws

The 1987 Constitution is the supreme law governing the Philippine mining
industry. Article XII on National Economy and Patrimony provides:
Section 2. All lands of the public domain, waters, minerals, coal, petroleum,
and other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna, and other natural resources are owned by
the State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development, and
utilization of natural resources shall be under the full control and supervision
of the State. The State may directly undertake such activities, or it may
enter into co-production, joint venture, or production-sharing agreements
with Filipino citizens, or corporations or associations at least 60 per centum
of whose capital is owned by such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable for not more than twentyfive years, and under such terms and conditions as may provided by law. In
cases of water rights for irrigation, water supply, fisheries, or industrial uses
other than the development of waterpower, beneficial use may be the
measure and limit of the grant.
The State shall protect the nations marine wealth in its archipelagic waters,
territorial sea, and exclusive economic zone, and reserve its use and
enjoyment exclusively to Filipino citizens.
The Congress may, by law, allow small-scale utilization of natural resources
by Filipino citizens, as well as cooperative fish farming, with priority to
subsistence fishermen and fish workers in rivers, lakes, bays, and lagoons.

The President may enter into agreements with foreign-owned corporations

involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on
real contributions to the economic growth and general welfare of the
country. In such agreements, the State shall promote the development and
use of local scientific and technical resources.
The President shall notify the Congress of every contract entered into in
accordance with this provision, within thirty days from its execution.
During the 1980s and early 1990s, there was, however, a decline in the
state of the mining sector that led to the enactment in 1995 of Republic Act
No. 7942, otherwise known as the Philippine Mining Act (Mining Act), as a
means to boost the industry. This law became a subject of controversy and
eventually

was

challenged

before

the

Supreme

Court

for

being

unconstitutional. The Supreme Court in the case of La Bugal-BLaan Tribal

Association Inc. vs. Ramos finally resolved the issue on the legality of the
Mining Act including those relating to financial and technical agreements
ruling that:
All mineral resources are owned by the State. Their exploration,
development and utilization (EDU) must always be subject to the full
control and supervision of the State. More specifically, given the
inadequacy of Filipino capital and technology in large-scale EDU
activities, the State may secure the help of foreign companies in all
relevant matters -- especially financial and technical assistance -provided that, at all times, the State maintains its right of full control.
The foreign assistor or contractor assumes all financial, technical and
entrepreneurial risks in the EDU activities; hence, it may be given
reasonable management, operational, marketing, audit and other

prerogatives to protect its investments and to enable the business to

succeed.
When the Supreme Court upheld the Constitutionality of the Mining
Act, this resulted in faster growth in mineral exports, percentage share to
total exports, employment in the mining sector and in the total paid-up
investments in mining.
The Philippine mining sector throughout the years has been
regulated by the Department of Environment and Natural Resources
(DENR) together with its attached agency Mines and Geosciences Bureau
(MGB). On the other hand, quarrying is within the jurisdiction of local
government units in accordance with the Republic Act 7160 otherwise
known as the Local Government Code of 1991.
Reference: Article XII 1987 Constitution
R.A 7160 Local Government Code of 1991
C. Mining Laws in the Philippines
1. Philippine Mining Act
a. Economic Aspect
According to Section 5 of the Mining Act, the government shall get a ten
percent (10%) share in all royalties and revenues to be derived by the
government from the development and utilization of the mineral resources
within mineral reservations which shall accrue to the MGB to be allotted for
special projects and other administrative expenses related to the
exploration and development of other mineral reservations.
Under the Local Government Code, local government units (LGUs) were
given authority to impose taxes on sand, gravel and other quarry resources
under Section 138 thereof. In addition, the Mining Act provides that LGUs
have a share of forty percent (40%) of the gross collection derived by the
National Government from mining taxes, royalties and other such taxes,

fees or charges from mining operations in addition to the occupational fees

(30% to the Province and 70% to the Municipalities concerned) in
consonance with the Local Government Code.
b. Environment Aspect
In ensuring that the government protects the right of the people to a
balanced and healthful ecology, the Mining Act has provided limitations on
how the mineral resources of the country can be utilized.
It established area limitations, maximum years for mining operations,
assignment of mining rights, compliance with rules and regulations
promulgated by the DENR concerning the sanitary upkeep of mining
operations. Section 69 of the Mining Law also required every contractor to
undertake an environmental protection and enhancement program
covering the period of the mineral agreement or permit which shall be
incorporated in the work program which the contractor or permitted shall
submit as an accompanying document to the application for a mineral
agreement or permit.
To further ensure the protection of our environment, an environment
clearance certificate is required based on an environmental impact
assessment pursuant to Section 70 of the Mining Act.
environmental

protection

have

been

outlined

in

Details of

Chapter

XVI of

Administrative Order No. 2010-21 or the implementing rules and

regulations promulgated of the Mining Act. Under Section 167-A of the
Administrative Order, a Certificate of Environmental Management and
Community Relations Record (CEMCRR) is required in the approval of
Mineral Agreements, FTAA, Quarry or Commercial/Industrial Sand and
Gravel Permit and Mineral Processing Permits.
The Mining Act and its Implementing Rules and Regulations also gave
premium to environmental protection. Measures were put in place to
ensure that mining contractors/operators comply with internationally
accepted standards of environment management.

Mining contractors/operators are mandated to allocate approximately ten

percent (10%) of the initial capital expenditures of the mining project for
environment-related activities. A mandatory annual allocation of three to
five percent (3%-5%) of the direct mining and milling costs to implement an
Annual Environment Protection and Enhancement Program (EPEP).
There is also a mandatory establishment of a Mine Rehabilitation Fund
(MRF) to be composed of the following:
1. a Monitoring Trust Fund of Php50,000.00 which is replenishable; and
2. a Rehabilitation Cash Fund of Php 5,000,000.00 or ten percent (10%)
of the EPEP cost, whichever is lower.
Such funds are to be deposited as a trust account in a government
depository bank to be managed by the MRF Committee composed of the
MGB

Regional

Director,

DENR

Regional

Executive

Director,

representatives from the LGU and an NGO, and the contractor.

Conduct of Environmental Work Program during the exploration stage and
an Environmental Protection and Enhancement Program during the
development and operations stage is also required under the Mining Act.
As an incentive to mining companies, the Mining Act mandates the
institutionalization of an incentive mechanism to mining companies utilizing
engineered and well-maintained mine waste and tailings disposal systems
with

zero-discharge

of

materials/effluents

and/or

with

wastewater

treatments plants.
To ensure compliance with the mining laws, a Multipartite Monitoring Team
composed of representatives from the MGB, DENR Regional Office,
affected communities, Indigenous Cultural Communities, an environmental
NGO, and the Contract/Permit Holder shall undertake the monitoring of
mining operations. On the other hand, the Mine Environmental and
Protection and Enhancement Office in each mining/contract area will set

the level of priorities and marshal the resources needed to implement

environmental management system.
The MGB Regional Director shall also have the power to summarily
suspend mining/quarrying operations in case of imminent danger to human
safety or the environment.
c. Issues
With the advent of Climate Change or Global Warming, people have shifted
their focus from utilization to preservation. The environmental community
has been clamoring for the government to push for stringent environmental
protection.
Moreover, according to the 10-year review of the mining industry published
by International Institute for Environment and Development, despite the
emergence of global rules for best practices in the mining industry, more
often than not, there is lack of implementation, independent verification,
public reporting, or consequences of non-compliance.
The government is also not getting its fair share in the mining industry as
espoused by President Benigno Aquino III. Mining contractors of Mineral
Production Sharing Agreement and Financial or Technical Assistance
Agreements can avail of fiscal and non-fiscal incentives granted under the
Omnibus Investment Code of 1987, as amended. In addition to these
incentives, the Mining Act also granted incentives for pollution control
devises, for income tax carry forward of losses, for income tax accelerated
depreciation on fixed assets, and investment guarantees, such as
investment repatriation, earning remittance, freedom from expropriation,
and requisition of investment, and confidentiality of information.
For FTAA contractors, an additional incentive, in the form of a tax holiday
on national taxes is granted from the start of the construction and
development period up to the end of the cost recovery period, but not to
exceed five years from the start of commercial operation.

These issues led the Aquino administration to review the existing mining
laws and policies of the country which resulted in the execution of
Executive Order No. 79 aimed at addressing the deficiencies in the current
laws and rules and regulations with respect to environmental protection
and income derived by the government from the mining industry.

d. Punishable acts and its penalties

False Statements
Any person who knowingly presents any false application, declaration, or
evidence to the Government or publishes or causes to be published any prospectus or
other information containing any false statement relating to mines, mining operations
or mineral agreements, financial or technical assistance agreements and permits
shall, upon conviction, be penalized by a fine of not exceeding Ten Thousand Pesos
(P10,000.00).
Illegal Exploration
Any person undertaking exploration work without the necessary exploration
permit shall, upon conviction, be penalized by a fine of not exceeding Fifty thousand
pesos (P50,000.00).
Theft of Minerals
Any person extracting minerals and disposing the same without a mining
agreement, lease, permit, license, or steals minerals or ores or the products thereof
from mines or mills or processing plants shall, upon conviction, be imprisoned from six
(6) months to six (6) years or pay a fine from Ten thousand pesos (P10,000.00) to
Twenty thousand pesos (P20,000.00), or both, at the discretion of the appropriate
court. In addition, he shall be liable to pay damages and compensation for the

minerals removed, extracted, and disposed of. In the case of associations,

partnerships, or corporations, the president and each of the directors thereof shall be
responsible for the acts committed by such association, corporation, or partnership.
Destruction of Mining Structures
Any person who willfully destroys or damages structures in or on the mining
area or on the mill sites shall, upon conviction, be imprisoned for a period not to
exceed five (5) years and shall, in addition, pay compensation for the damages which
may have been caused thereby.
Mines Arson
Any person who willfully sets fire to any mineral stockpile, mine or workings,
fittings or a mine, shall be guilty of arson and shall be punished, upon conviction, by
the appropriate court in accordance with the provisions of the Revised Penal Code
and shall, in addition, pay compensation for the damages caused thereby.
Willful Damage to a Mine
Any person who willfully damages a mine, unlawfully causes water to run into a
mine, or obstructs any shaft or passage to a mine, or renders useless, damages or
destroys any machine, appliance, apparatus; rope, chain, tackle, or any other things
used in a mine, shall be punished, upon conviction, by the appropriate court, by
imprisonment not exceeding a period of five (5) years and shall, in addition, pay
compensation for the damages caused thereby.
Illegal Obstruction to Permittees or Contractors
Any person who, without justifiable cause, prevents or obstructs the holder of
any permit, agreement or lease from undertaking his mining operations shall be
punished, upon conviction by the appropriate court, by a fine not exceeding Five
thousand pesos (P5,000.00) or imprisonment not exceeding one (1) year, or both, at
the discretion of the court.

Violation of the Terms and Conditions of the Environmental Compliance Certificate

Any person who willfully violates or grossly neglects to abide by the terms and
conditions of the environmental compliance certificate issued to said person and which
causes environmental damage through pollution shall suffer the penalty of
imprisonment of six (6) months to six (6) years or a fine of Fifty thousand pesos
(P50,000.00) to Two Hundered Thousand Pesos (P200,000.00), or both at the
discretion of the court.
Illegal Obstruction to Government Officials
Any person who illegally prevents or obstructs the Secretary, the Director or
any of their representatives in the performance of their duties under the provisions of
this Act and of the regulations promulgated hereunder shall be punished, upon
conviction, by the appropriate court, by a fine not exceeding Five thousand pesos
(P5,000.00) or by imprisonment not exceeding one (1) year, or both, at the discretion
of the court.
Other Violations
Any other violation of this Act and its implementing rules and regulations shall
constitute an offense punishable with a fine not exceeding five thousand pesos
(P5,000.00).

References: Chapter XVI of Administrative Order No. 2010-21

Omnibus Investment Code of 1987
Doyle, C. Wicks, C. and Nally F. (2007)
Mining in the Philippines; Concerns and Conflicts.