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Mining Exports
In 2014, the Philippines had US$ 4.01 Billion exports of
minerals and mineral products.
Table 1
Gross Value Added in Mining and Quarrying
by Industry Group (in percent)
(1 Quarter of 2013 – 4th Quarter of 2015)
st
1
Retrieved from: http://mgb.gov.ph/images/links-
images/ThePhilippineMineralsIndustryAtAGlance.pdf, February 11, 2016.
2
Retrieved from: http://mgb.gov.ph/2015-05-13-02-02-11/mgb-news/181-metallic-production-
value-suffers-deficit-in-q3-2015
Based on statistics from the Philippine Statistics Authority (PSA), the
mining and quarrying industry sharply fell during the first to third
quarter of 2015, as compared to the same period in 2014.
Table 2
Gross Value Added in Mining and Quarrying by Industry Group
(1st Quarter of 2013 to 4th Quarter of 2015)
*At current prices, in million pesos
Employment
235,000 workers currently employed in the minerals industry.
While estimates vary, it is conservatively assumed that for every
job in the industry, about four indirect jobs may be generated in
the upstream and downstream sectors.
3
Retrieved from: http://philippinemining.imaginet.com.ph/mining-act-and-related-
content/mining-development-and-mineral-exploration-projects, on February 12 ,2016.
The Philippines is rich in minerals and certain energy
resources. It ranks among the top ten world producers of
gold, copper, and chromite. Its mineral reserves also include
silver, nickel, cobalt, and zinc. According to the Chamber of
Mines4, the country’s mineral reserves (gold, copper, nickel,
iron, chromium and aluminum) are estimated to be worth PhP
47 trillion (US$ 840 billion). The largest untapped copper
deposit in Southeast Asia is found in Tampakan, South
Cotabato, which is considered the ground zero of mining in the
Philippines.
4
Chamber of Mines (2011), http://business.inquirer.net/2651/phi8lippinhwa-mining-wealth-seen-
at-840b, as cited by Antonio G. M. La Vina, Philippine Law and Ecology. Vol.1, p. 8
Environmental Protection and Enhancement Programs and Final
Mine Rehabilitation and/or Decommissioning Plans,
respectively.
7
Semirara Mining has a Coal Operating Contract (COC) with Department of Energy (DOE) in
1977 (amended 1981) for the exploration, development, mining and utilization of coal over
Semirara Island, Antique pursuant to Presidential Decree No. 972. On May 13, 2008, the DOE
approved the term extension of the Company’s COC from July 13, 2012 to July 14, 2027.
Semirara Island has an estimated coal reserve of around 170 million MTs. On November 12,
2009, DOE and the Company executed Second Amendment to Coal Operating Contract. The
second amendment amended the coordinates of the contract area to include an area of 3,000 and
4,200 hectares, more or less situated in Caluya Island and Sibay Island, Antique. (Sourced from
the 2014 Annual Report of the corporation).
8
“Fast Facts: Who owns Semirara?”, by Cai U. Ordinario (February 20, 2013).
Retrieved from: http://www.rappler.com/business/21968-one-of-ph-s-richest-own-
semirara, on December 3, 2015.
9
GMA Network News. Retrieved from:
mentioned that incessant rains before the accident might
have triggered the mishap.
On July 17, 2015, nine (9) mine workers were buried alive
when a portion of the northern wall at the Panian mining site
once again collapsed in a landslide due to continuous rains
that loosed the excavated earth merely dumped atop the
wall.10
http://www.gmanetwork.com/news/story/294880/news/regions/five-miners-killed-
five-missing-as-semirara-coal-mine-collapses,Retrieved on: December 3, 2015.
10
Manila Bulletin.com. Retrieved from:
http://www.mb.com.ph/accidents-possible-semirara-mine-contract-violations-to-
be-probed/, on December 3, 2015.
II. LEGAL FRAMEWORK
Constitutional Provisions
Article XII, Section 2 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. xxxxx” (The Regalian Doctrine11)
The State shall have full control and supervision of the exploration,
development, and utilization of natural resources
11
The Regalian Doctrine (Jura Regalia) a legal concept first introduced into the
country from the West by Spain through the Laws of the Indies and the Royal
Cedulas, all lands of the public domain belong to the State. This means that the
State is the source of any asserted right to ownership of land, and is charged with
the conservation of such patrimony. (Republic v. Intermediate Appellate Court, No.
L-71285, November 5, 1987)
with priority to subsistence fishermen and fish workers in rivers,
lakes, bays, and lagoons.
How acquired:
Hereinafter referred to as the “Mining Act”; this law became effective on July 6,
12
2012.
13
Note: Section 4 of Executive Order No. 79 (E.O. 79) provides that “[n]o new
mineral agreements shall be entered into until a legislation rationalizing existing
revenue sharing schemes and mechanisms shall have taken effect. The DENR may
continue to grant and issue Exploration Permits under existing laws, rules, and
guidelines.”
14
Section 19 of DENR Administrative Order 2010-21 or the Consolidated
Implementing Rules and Regulations of the Mining Act of 1995 (hereinafter
referred to as the Mining Act IRR).
areas closed to mining applications. The applicant is also
required to submit a Certificate of Environmental
Management and Community Relations Record15. Should
there be no conflict on the area applied for, the MGB issues
an area status clearance and a notice of application.
15
Section 168 (Environmental Work Program) of the Mining Act IRR provides that
all applicants for Mineral Agreements and FTAAs which shall undertake
exploration activities, shall submit to the MGB Regional Office an Environmental
Work Program (EWP) which shall detail the environmental impact control and
rehabilitation activities proposed during the exploration period including the costs
to enable sufficient financial resources to be allocated to meet the environmental
and rehabilitation commitments.
16
Section 7 of E.O. 79 IRR.
b. Mineral(s) Processing Permit (MPP) - an MPP gives the
grantee the right to engage in the processing of minerals. The
MPP shall be good for a period of five (5) years, renewable for
the like period, but not to exceed a total of twenty five (25)
years. In addition, the Mining Act may grant a foreign-owned/-
controlled corporation with an MPP17.
How Acquired:
The total government share in the MPSA shall be the excise tax
on mineral products as provided for in Republic Act No. 772918.
17
Section 55 of the Mining Act.
18
An Act Reducing the Excise Tax Rates on Metallic and Non-metallic Minerals and
Quarry Resources, Amending for the Purpose Section 151(a) of the National Internal
Revenue Code, as Amended, Section 151. Rates of Tax – xxx thereof. (See Chapter VI on
Taxation of Mineral Products for discussion).
(1) On coal and coke, a tax of ten pesos (P10.00) per metric ton.
How acquired:
(3) On all metallic minerals, a tax based on the actual market value of the gross
output thereof at the time of removal, in the case of those locally extracted or
produced; or the value used by the Bureau of Customs in determining tariff and
customs duties, net of excise tax and value-added tax, in the case of importation, in
accordance with the following schedule:
For the purpose of this subsection, ‘indigenous petroleum’ shall include locally
extracted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas and all
other similar or naturally associated substances with the exception of coal, peat,
bituminous shale and/or stratified mineral deposits.”
19
Section 7, E.O. 79.
d. Joint Venture Agreements (JVAs) – a JVA is an agreement
where a joint venture company is organized by the government
and a contractor, with both parties having equity shares. Aside
from earnings in equity, the government shall be entitled to a
share in the gross output.
Notes:
How acquired:
Section 291 of the LGC provides that LGUs shall have a share based on the
preceding fiscal year from the proceeds derived by any government agency or
government-owned and controlled corporation (GOCC) engaged in the utilization
and development of the national wealth, based on the following formula,
whichever shall produce a higher share for the LGU:
(a) One percent (1%) of the gross sales or receipts of the preceding calendar
year; or
(b) Forty percent (40%) of the mining taxes, royalties…including relates
surcharges, interests, or fines the government agency or GOCC would
paid if it were not otherwise exempt.
(a)Where the natural resources are located in the province, the allocation of
shares shall be:
Province: twenty percent (20%)
Component City of Municipality: forty-five percent (45%)
Barangay: thirty five percent (35%)
Where the natural resources are located in two or more provinces, or in two or
more component cities or municipalities or in two or more barangays, their
respective shares shall be computed on the basis of:
Under the Mining Act and its IRR, only “qualified persons” are
allowed to hold and be granted permits and mineral agreements,
which is defined as:
21
Under Section 58 of the Mining Act IRR, the Negotiating Panel is composed of
the DENR Secretary, Director of the MGG, and representatives from the Board of
Investments/Department of Trade and Industry, National Economic Development
Council, Department of Finance, and Representatives from the DENR Regional
Offices concerned.
a. any Filipino citizen of legal age and with capacity to
contract; or
During the term of the permits and mineral agreements, the holder
or grantee has the right to conduct activities therein without
interference as long as it complied with the terms and conditions of
the permit or mineral agreement.
o DENR
- Primary government agency responsible for the
conservation, management, and development of mineral
resources.
- It is authorized to enter into mineral agreements on
behalf of the government, as well as recommend
FTAAs to the President upon endorsement of the
DENR Director.
Small-Scale Mining
25
Hereinafter referred to as the “Small-Scale Mining Act” (June 27, 1991).
such SSMPs are revoked, cancelled, or terminated with the
cause26: Provided, that the SSMP shall have the option to shift to a
people’s small-scale mining contract.
Qualification of Applicants
Related Laws
27
G.R. No. 101083, 224 SCRA 792, Jul. 30, 1993.
to existing laws, rules, and regulations and the terms and
conditions of the grant thereof.
o The Ancestral Domains Office shall also issue, upon the free
and prior informed consent of the ICCs/IPs concerned,
certification prior to the grant of any license, lease or permit
for the exploitation of natural resources affecting the interests
of ICCs/IPs or their ancestral domains and to assist the
ICCs/IPs in protecting the territorial integrity of all ancestral
domains. It shall likewise perform such other functions as the
Commission may deem appropriate and necessary (Section
46a).
28
Republic Act No. 8731 (October 29, 1997).
Free and Prior Informed Consent (FIPC) —shall mean the consensus of all members of
the Indigenous Cultural Communities/Indigenous Peoples to be determined in accordance
with their respective customary laws and practices, free from any external manipulation,
interference and coercion, and obtained after fully disclosing the intent and scope of the
activity, in a language and process understandable to the community;
o Environmental Considerations (Section 58)— Ancestral
domains or portions thereof, which are found to be necessary
for critical watersheds, mangroves, wildlife sanctuaries,
wilderness, protected areas, forest cover, or reforestation as
determined by appropriate agencies with the full participation
of the ICCs/IPs concerned shall be maintained, managed and
developed for such purposes.
This case calls for the application of the “grandfather rule” since
doubt prevails and persists in the corporate ownership of
petitioners. Doubt is present in the 60-40 Filipino equity
ownership of petitioners since their common investor, the 100%
Canadian corporation MBMI, funded them.
Petitioner MacArthur
It is quite evident that petitioners have been trying to have this case
dismissed for being “moot”. Their final act, wherein MBMI was
able to allegedly sell/assign all its shares and interest to DMCI
only proves that they were in fact not Filipino corporations from
the start. The recent divesting of interest by MBMI will not
change the stand of the Supreme Court with respect to the
nationality of petitioners prior to the suspicious change in their
corporate structures.
Article XII, Section 2(3) of the Constitution provides that the Congress
may, by law, allow small-scale utilization of natural resources by
Filipino citizens.
Administrative Code of 1987 provides that the DENR is, subject to law
and higher authority, in charge of carrying out the State’s constitutional
mandate, under Section 2, Article XII of the Constitution, to control and
supervise the exploration, development, utilization, and conservation of
the country’s natural resources. Hence, the enforcement of small-scale
mining law in the provinces is made subject to the supervision, control,
and review of the DENR under the Local Government Code of 1991,
while the People’s Small Scale Mining Act of 1991 provides the People’s
Small Scale Mining Program is to be implemented by the DENR
Secretary in coordination with other concerned local government
agencies.
Clearly, the Local Government Code did not fully devolve the
enforcement of the small-scale mining law to the provincial government,
as its enforcement is subject to the supervision, control, and review of
the DENR.
That such effectivity took place after the convening of the first Congress
is irrelevant. At the time President Aquino issued E.O. No. 279, she was
till validly exercising legislative powers under the Provisional
Constitution.
Section 1.2 of the WMCP FTAA states that WMCP shall provide all
financing, technology management, and personnel necessary for the
mining operations. WMCP may make expansions, improvements, and
replacements of the mining facilities and may add such new facilities as
it considers necessary for the mining operations.
In sum, the Court finds the following provisions of R.A. No. 7942 to be
violative of Section 2, Article XII of the Constitution:
(5) Section 39, which allows the contractor in a financial and technical
assistance agreement to convert the same into a mineral
production-sharing agreement.
The following provisions of the same Act are likewise void as they are
dependent on the foregoing provisions and cannot stand on their own:
(4) Section 37, which prescribes the procedure for filing and
evaluation of financial or technical assistance agreement proposals.
(8) The second and third paragraphs of Section 81, which provide for
the Government's share in a financial and technical assistance
agreement.
Republic Act No. 3931 (An Act Creating The National Water And Air
Pollution Control Commission) was passed in June 18, 1964 to maintain
reasonable standards of purity for the waters and air of the country with
their utilization for domestic, agricultural, industrial and other legitimate
purposes. Said law was revised in 1976 by Presidential Decree No. 984
(Providing For The Revision Of Republic Act No. 3931, Commonly
Known As The Pollution Control Law, And For Other Purposes) to
strengthen the National Pollution Control Commission to best protect the
people from the growing menace of environmental
pollution. Subsequently, Executive Order No. 192, s. 1987 (The
Reorganization Act of the DENR) was passed. The internal
structure, organization and description of the functions of the new
DENR, particularly the Mines and Geosciences Bureau, reveals no
provision pertaining to the resolution of cases involving violations of the
pollution laws. The Mines and Geo-Sciences Bureau was created under
the said EO 192 to absorb the functions of the abolished Bureau of
Mines and Geo-Sciences, Mineral Reservations Development Board and
the Gold Mining Industry Development Board to, among others,
recommend policies, regulations and programs pertaining to mineral
resources development; assist in the monitoring and evaluation of the
Bureaus programs and projects; and to develop and promulgate
standards and operating procedures on mineral resources development.
On the other hand, the PAB was created and granted under the same EO
192 broad powers to adjudicate pollution cases in general.
The power of the mines regional director does not foreclose PABs
authority to determine and act on complaints filed before it. The power
granted to the mines regional director to issue orders requiring the
contractor to remedy any practice connected with mining or quarrying
operations or to summarily suspend the same in cases of violation of
pollution laws is for purposes of effectively regulating and monitoring
activities within mining operations and installations pursuant to the
environmental protection and enhancement program undertaken by
contractors and permittees in procuring their mining permit. While the
mines regional director has express administrative and regulatory
powers over mining operations and installations, it has no adjudicative
powers over complaints for violation of pollution control statutes and
regulations.
Neither was such authority conferred upon the Panel of Arbitrators and
the Mines Adjudication Board which were created by the said law. The
provisions creating the Panel of Arbitrators for the settlement of
conflicts refers to disputes involving rights to mining areas, mineral
agreements or permits and those involving surface owners, occupants
and claim-holders/concessionaires. The scope of authority of the Panel
of Arbitrators and the Mines Adjudication Board conferred by RA 7942
clearly exclude adjudicative responsibility over pollution cases.
Nowhere is there vested any authority to adjudicate cases involving
violations of pollution laws and regulations in general.
IV. ISSUES
1. Balancing of Interest with IPRA
2. Environmental Protection/Ecology
Since the advent of the Local Government Code in 1991 and supported
by the Philippine Mining Act of 1995, all activities – especially mining
from exploration, development until commercial operations – must
obtain the endorsement and approval of the LGUs and its inhabitants
concerned to be able to obtain an exploration permit including permits to
develop, operate and transport, and sell mineral products.
The government is not getting its “fair share” in the mining industry as
espoused by President 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.
References:
Tax Exemptions
C. Exemption from wharfage dues and export tax, duty, impost, and
fees
All enterprises registered under the IPP will be given a ten (10)
year period from the date of registration to avail of the exemption
form wharfage dues and any export tax, impost, and fees on its
non-traditional export products.
Tax Credits
The BOI endorses to the BIR two types of zero percent (0%) VAT
applications:
Non-fiscal Incentives
• the amount of MCIT is greater than the normal income tax due
from such corporation.
The Tax Code allows any excess of the MCIT over the normal income
tax to be carried forward on an annual basis and credited against the
normal income tax for three immediately succeeding taxable years.
2. Excise Tax (An Act Reducing the Excise Tax Rates on Metallic and
Non-metallic Minerals and Quarry Resources, Amending for the
Purpose Section 151(a) of the National Internal Revenue Code, as
Amended, Section 151. Rates of Tax – xxx thereof. )
(1) On coal and coke, a tax of ten pesos (P10.00) per metric ton.
(3) On all metallic minerals, a tax based on the actual market value of
the gross output thereof at the time of removal, in the case of those
locally extracted or produced; or the value used by the Bureau of
Customs in determining tariff and customs duties, net of excise tax and
value-added tax, in the case of importation, in accordance with the
following schedule:
(ii) On the fourth and fifth year, one and a half percent (1 1/2%); and
Section 290 of the LGC provides that local government units (LGUs)
shall have a share of forty percent (40%) of the gross collection derived
by the national government from the preceding fiscal year from mining
taxes, including related surcharges, interests, or fines, and from its share
in any co-production, joint venture or production sharing agreement in
the utilization of the national wealth within their territorial jurisdiction.
Section 291 of the LGC provides that LGUs shall have a share
based on the preceding fiscal year from the proceeds derived by any
government agency or government-owned and controlled corporation
(GOCC) engaged in the utilization and development of the national
29
wealth, based on the following formula, whichever shall produce a
higher share for the LGU:
(a) Where the natural resources are located in the province, the
allocation of shares shall be:
Province: twenty percent (20%)
Component City of Municipality: forty-five percent (45%)
Barangay: thirty five percent (35%)
30
Retrieved from: (http://www.syciplaw.com/Documents/M2014%20Philippines.pdf)
However, the Philippines has entered into treaties and has enacted
laws which address collateral concerns such as:
C. Environmental Protection:
* Obligations under the Rio Declaration on Environment
and Development (“Rio Declaration”)31
The Rio Declaration entered into force on June 14, 1992, with
the primary goal of establishing a new and equitable global
partnership through the creation of new levels of cooperation
among States, key sectors of societies and people, and to work
towards international agreements which respect the interests of
all and protect the integrity of the global environmental and
developmental system. The Rio Declaration recognizes the fact
that States have the sovereign right to exploit their own natural
resources but must ensure that the activities within their
jurisdiction and control do not cause environmental damage to
other States.
31
The Rio Declaration on Environment and Development, often shortened to Rio
Declaration, was a short document produced at the 1992 United Nations "Conference on
Environment and Development" (UNCED), informally known as the Earth Summit, and
signed by over 170 countries.
VIII. FUTURE DIRECTIONS IN THE PHILIPPINE
MINING INDUSTRY
The following recommendations were taken from the Philippine
Development Plan for 2011-2016, published by the National Economic
Development Authority (NEDA).
Legislative Agenda