Coal Development act of 1976
Bureau – shall determine
- enacted on July 28, 1976, PD No. 972 and
amended on July 27, 1977 by PD No. 1174
It aims to:
 promote an accelerated exploration,
development, exploitation, production
and utilization of coal
 encourage the participation of private
sector with sufficient capital, technical
and managerial resources in the
exploitation and production of coal
resources
 upgrade the technical and financial
capabilities of coal industry.
The country is divided into coal regions and
exploration and exploitation programs shall be
instituted pursuant to the Decree.
I. Coal Exploration, Development and
Production by the Government
Energy Resource Development Bureau
- shall undertake the active exploration,
development and production “EDP” of
coal resources.
- execute coal-operating contracts
It may cover:
- Public lands
- Unreserved coal bearing lands
- Areas covered by valid and subsisting
coal revocable permits
- Coal leases and other existing rights
- Coal areas/mines whose leases are
presently owned by government
owned corporations
- Coal mineable areas operated by govt.
agencies
Department Circular No. 2006-12-0014
System of awarding service/operating
contracts for coal geothermal and prospective
areas
1.
prospective coal, geothermal or
petroleum areas for inclusion in the
competitive public contracting
round.
2. DOE Secretary – declares such areas
open for competitive public
contracting round
3. During competitive public round,
DOE can accept proposals for
service/ operating contracts.
4. After awarding service/operating
contracts, applicants for small-
mining permit can be entertained.
II. Blocking System
 Blocking System – Each coal region shall
be divided into meridional blocks or
quadrangles, each containing 1,000
hectares, more or less.
III. Preference of existing permittees or
leaseholders
 All valid and subsisting permittees or
leaseholders shall be given preference in
the grant of coal operating contract.
IV. Coal Operating Contract
 one of the authorized ways of active
exploration, development, and production
of coal resources in a specified contract
area.
 service , technology and financing are
furnished by the operator for which it
shall be entitled to reimbursement of
operating expenses
V. Obligations under Coal Operating Contract
The operator under a coal operating contract
shall undertake, manage and execute the coal
operations which shall include:
(a) The examination and investigation of lands
supposed to contain coal
(b) Steps necessary to reach the coal deposit so
that it can be mined, including but not limited to
shaft sinking and tunneling; and
(c) The extraction and utilization of coal
deposits.
The Government shall require the operator to:
(a) Provide all the necessary service and
technology;
(b) Provide the requisite financing;
(c) Perform the work obligations and program
prescribed in the coal operating contract which
shall not be less than those prescribed in this
Decree;
(d) Operate the area on behalf of the
Government in accordance with good coal
mining practices using modern methods
appropriate for the geological conditions of the
area
(e) Furnish the Energy Development Board
promptly with all information, data and reports
which it may require;.
(f) Maintain detailed technical records and
account of its expenditures;
(g) Conform to regulations regarding, among
others, safety demarcation of agreement acreage
and work areas,
(h) Maintain all necessary equipment in good
order and allow access to these as well as to the
exploration, development and production sites
and operations to inspectors authorized by the
Energy Development Board;
(i) Allow representatives authorized by the
Energy Development Board full access to their
accounts, books and records for tax and other
fiscal purposes.
The Bureau shall:
- reimburse the operator for all the
operating expenses not exceeding 90% of
the gross process from production in a
year.
- if it exceeds 90%, the unrecovered
expenses shall be recovered from the
operation of succeeding years.
- Pay the operator a fee, shall not exceed
40% of the balance of the gross income
Doctrine of Primary Jurisdiction
- See Industrial Enterprises Inc. case
VI. Incentives to Operators
- exemption from all taxes except income
tax
- exemption from payment of tariff duties
and compensating tax on importation of
machinery and equipment
- fixed assets owned by coal units may be
subject of depreciation
- right to remit at prevailing exchange rate
- govt. financial institutions shall accord
high priority to applications for financial
assistance submitted by operators
- alien technical and specialized personnel
may be employed. provided Filipinos shall
be given preference
Incentives to coal users:
- tax exemption on imported capital
equipment
- tax credit on domestic capital equipment
- net operating loss incurred may be
carried over as a deduction from taxable
income for the 6 yrs
- exemption from income tax on proceeds
of gains realized from the sale, disposition
or transfer of assets
- fixed assets used may be depreciated
- right to remit at prevailing exchange rate
- preference in grant of govt. loans
VII. Entry and use of private lands
- Power of Eminent Domain may be
invoked
- If the owner refuses to allow coal’s entry,
coal operator shall notify the Bureau
- Coal operator shall post a bond in an
amount fixed by the Bureau
- Basis of compensation of the surface
owner : type of land, value of the trees,
plants and other existing improvements.
In the absence of agreement, surface owner shall
be entitled to the following compensation:
a) Titled Lands – at least P1.00 for every
ton of coal extracted on his land plus
value of improvements damaged or
destroyed.
b) Untitled Lands – at least P0.50 for every
ton of coal extracted on his land plus
value of improvements damaged or
destroyed.
c) Government reserved lands open to
coal operating contract – compensation
due shall accrue equally between the
supervising agency and the Bureau.
VIII. TIMBER RIGHTS
The operator may cut trees or timber within his
coal contract as may be necessary for
exploration, development and exploitation of the
area
The operator granted with timber right shall be
obligated to perform reforestation works in
accordance with the regulations of FMB.
IX. WATER RIGHTS
A coal operator shall also enjoy water rights
necessary for the exploration, development and
exploitation of is coal contract area, but water
rights already granted or legally existing shall
not thereby be impaired.
Cases:
1. Bacaltos Coal Mines vs. CA
FACTS:
Petitioner Bacaltos authorized Savellon to
use the coal operating contract of BCM of which
he is the proprietor, for any legitimate purpose it
may serve.
A Trip Charter Party was executed
between BCM, represented by its chief operating
officer, Savellon and San Miguel Corporation
(SMC), it lets, demises the vessel to charterer
SMC for three round trips to Davao. The vessel
was able to make only one trip, SMC filed an
action for specific performance.
The petitioners alleged that Savellon was
not their Chief Operating Officer and that the
powers granted to him are only those clearly
expressed in the Authorization which do not
include the power to enter into any contract with
SMC.
ISSUE: Whether or not Savellon was duly
authorized by the petitioners to enter into the
Trip Charter Party
RULING:
No. The broadest scope of Savellon's
authority is limited to the use of the coal
operating contract and the clause cannot
contemplate any other power not included in the
enumeration or which are unrelated either to the
power to use the coal operating contract or to
those already enumerated.
There is absolutely nothing on the face of
the Authorization that confers upon Savellon the
authority to enter into any Trip Charter Party.
There is no evidence at all that Bacaltos Coal
Mines as a coal mining company owns and
operates vessels, and even if it owned any such
vessels, that it was allowed to charter or lease
them.
2. Industrial Enterprises Inc. vs. CA
FACTS:
 Industrial Enterprises Inc. (IEI) was
granted coal operating contract by Bureau of
Energy Development (BED) in Eastern Samar but
it was later on advised that the coal operator in
the area subject of the contract should be
Marinduque Mining and Industrial Corporation
(MMIC).
IEI and MMIC executed a Memorandum of
Agreement (MOA) transferring to the latter all
the former’s rights and interest in the contract.
IEI filed an action for rescission of MOA.
RTC rescinded the MOA
CA reversed, saying that it’s BED, not the Trial
Court, which has jurisdiction over the action.

ISSUE: Whether or not RTC has jurisdiction

RULING:
No. IEI's cause of action was not merely
the rescission of a contract but the reversion or
return to it of the operation of the coal blocks.
These are matters properly falling within the
domain of the BED.
Clearly, the doctrine of primary
jurisdiction finds application in this case since
the question of what coal areas should be
exploited and developed and which entity should
be granted coal operating contracts over said
areas involves a technical determination by the
BED as the administrative agency in possession
of the specialized expertise to act on the matter.
The Trial Court does not have the competence to
decide matters concerning activities relative to
the exploration, exploitation, development and
extraction of mineral resources like coal.