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6. Oil a Catalyst for Peace Principal minerals found in the Philippines include gold, copper, nickel,
or Seeds of Intensified chromite and manganese. The Philippines has reserves of about 7
Conflict billion metric tons of metallic minerals and 52 billion metric tons of
non-metallic minerals making it among the countries with the richest
6.1. A Nigerian Oil endowment in gold, copper and nickel. Despite its abundant mineral
Scenario?
resources, the Philippines never realized its full potential. The mining
Editor: Benedicto R. Bacani Associate Editor: Ramie P. Toledo Lay-out Artist: Jazz L. Cuaresma
regime of the Philippines follows the Regalian Doctrine in which all mineral resources nature of mineral rights granted by governments. Agreements and structures vary so
of the country are owned by the State. Similar to other countries that were colonized, that it is difficult to determine whether a specific contractual or regulatory arrangement
its past colonial experience under Spain and then America has given the Philippines a is a concession, a license, or a permit. Sometimes these terms are used interchangeably.
decidedly nationalistic view of the exploitation and development of its mineral resources Having contractual form does not in itself indicate the material substance of the
so that the general rule in the mining regime of the country is that the exploitation of mineral rights because hybrid forms now predominate. Whether mineral rights are
mineral wealth is reserved for Filipinos. Hence, the 1987 Philippine Constitution limits called licenses, permits, leases, concessions or contract rights, what is essential is
the full participation of foreigners to financial or technical assistance in large-scale mining that the nature and status of those rights are determined in a legal act that is binding
projects. on the state and other parties.
In 1995, in an effort to revitalize the mining industry, the Philippine government enacted 2.1. TYPES OF MINERAL RIGHTS
a new mining law. The Philippine Mining Act of 1995 provides for mineral tenure and
mining rights under an Exploration Permit, Mineral Agreement (i.e. Mineral Production Because of the prevalence of the hybrid approach to the grant of mineral rights
Sharing, Co-Production and Joint Venture) allowing maximum 40% foreign equity, and by governments, myriad labels have increasingly been utilized to describe these
Financial or Technical Assistance Agreement (FTAA) for 100% foreign equity in mining. arrangements. The difficulty with labeling mineral rights is that host governments
may negotiate varying terms for agreements over time. Having said that, among the most
1. PHILIPPINE MINING LAW common mineral contracts or agreements granting mineral rights are concessions,
production-sharing contracts, joint venture contracts, contracts of work, service contracts
The 1987 Philippine Constitution states: “All lands of the public domain, waters, and technical assistance contracts.
minerals, coal, petroleum, and other minerals oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are In the traditional concession, the State’s role was limited to granting the
owned by the State.” Unlike some other constitutional mining provisions that simply declare concessionaire access to large areas with exclusive mining rights including complete
only general mining principles to be implemented in mining statutes, the Philippine control over the disposition of mineral resources, in exchange for a production royalty.
Constitution itself specifies that the State may directly undertake mining activities or enter In the Philippine context, a concession is described as follows: “[T]he concessionaire
into co-production, joint venture or production sharing agreements. For large-scale mining, makes a direct equity investment for the purpose of exploiting a particular natural
the government has the option under the Constitution to enter into financial or technical resource within a given area. Thus, the concession amounts to complete control by
assistance agreements with 100% foreign-owned entities. In case a mining agreement the concessionaire over the country’s natural resource, for it is given exclusive and
or FTAA is obtained right from the start of mining activity, the exploration right is already plenary rights to exploit a particular resource at the point of extraction. In consideration
integrated into the mining agreement similar to the unified concession of Peru where a for the right to exploit a natural resource, the concessionaire either pays rent or
single license provides for both exploration and mining rights. royalty, which is a fixed percentage of the gross proceeds.”
2. MINERAL RIGHTS The modern concession is similar to what is described above but a more complicated
fiscal regime consisting of taxes and royalty. The joint venture is a participation agreement
Minerals are owned by the State in most countries. There are three main ways used by between the State and the miner, which may be an equity joint venture or contractual
governments in granting mineral exploration authorisation and mineral exploitation rights joint venture. In equity joint ventures, the State participates as an equity partner
(the combination of which is the essence of mineral rights). The first is based on a grant of in the mining venture while in contractual joint ventures, the miner is limited to a
title to the minerals a licensing system defined by a Mining Law and national regulation. contractual right for financial compensation. In production-sharing contracts, the State
Second, host governments might use only a mining agreement which becomes the and the miner share in the production of the mining venture with the miner shouldering
mining law that governs that project. Third, and by far the most widespread method, the management, the expense and risk of exploration and the development and utilization
is the hybrid system in which the mining title (and national regulations) and mining of the mineral resources, while being entitled to cost recovery and a profit from production.
agreement are used simultaneously or in turn. The difficulty is in determining exactly the
Service contracts are akin to production sharing contracts in the sense that the
The biggest bone of contention in the ARMM legal framework for mining is what constitutes So far, the biggest and most active mining area in the ARMM is in the far flung Province
“strategic minerals” which issue arose of the 1996 GRP-MNLF Peace Agreement. The of Tawi-Tawi, where the MPSA of “SR Languyan” in Languyan Municipality has spawned
ARMM for the most part has asserted that “strategic minerals” only refers to sources of contractors for the mining of nickel ore, which are exported raw for processing in China.
“potential energy” and fossil fuels in accordance with a vague enumeration found in the
expanded ARMM Organic Act (RA 9054). National government has asserted at one time Recently, this year, 2018 the ARMM regional government initiated the enactment of the
or another that it is the national government that ought to define what consists of “strategic ARMM mining code entitled “An Act Providing for Responsible Mining of the Autonomous
minerals” to include metals and metallic minerals. However, national government has Region in Muslim Mindanao, and for Other Purposes” principally authored by Assemblyman
not gone to the extent of cancelling Mineral Production Sharing Agreements (MPSA) that Hannibal Tulawie of Sulu. The legislation is expected to be passed and signed into law
have been issued by the ARMM Department of Environment and Natural Resources. The before the end of this year, 2018. As anticipated there is no significant deviation from the
ARMM has not issued any new MPSAs from the first few that it issued particularly for Philippine Mining Law except that the Regional Wealth Tax is now imposed in addition to the
nickel mining in Tawi-Tawi province. share of the ARMM regional government from the national taxes on mining. The Regional
Wealth Tax according to some quarters did not have legal basis and some have argued
The issue on “strategic minerals” has affected even the issuance of Environmental that the ARMM Revenue Code was not sufficient basis for its imposition on mining so this
Compliance Certificate for mining in Tawi-Tawi because the national Department of legislation is supposed to cure that perceived legal defect even though no one has actually
Environment and Natural Resources came out with Department Order No. 2012-7, questioned the tax in court.
classifying nickel as one of the strategic minerals within the national government’s purview.
However, unlike in the national mining laws and legal regime, under the proposed ARMM
This issue of “strategic minerals” has been done away with in the recently passed mining law the grant of mining license in the ARMM must have the concurrence of the
Bangsamoro Organic Law (BOL) by removing any distinctions regarding minerals but the legislative branch of government, i.e. the Regional Legislative Assembly, and no longer
BOL is now very explicit that mining and mineral resources in the Bangsamoro-ARMM are the sole prerogative of the executive branch, i.e. the ARMM Regional Governor. This
subject to the Constitution and national laws. Hence, the Bangsamoro cannot pass any concurrence by the legislative for mineral licenses will probably be carried over in the BOL
legislation in its parliament that would contravene the Philippine mining laws and legal because the structure of government under the BOL is parliamentary, wherein the executive
regime. and legislative branches are fused or joined. This extra layer of consent from the legislative
branch for mining to take place may both be a boon and a bane depending on whether
The current ARMM government has also imposed the 5% regional wealth tax on gross mining becomes a significant economic activity and source of revenues for the regional
sales provided by the ARMM Revenue Code on mining activities, which makes mining government.
relatively more expensive in the ARMM than in other areas of the country. Mining has
significantly contributed to the regional government’s own sources of revenues so that 5. OVERVIEW OF THE PHILIPPINE SERVICE CONTRACT
taxes, fees and charges grew from P52.9 million or 8.1% of the total internally generated
revenues in 2013 to P267.8 million in 2014 due to the higher collection of the regional Presidential Decree (PD) 87 or “The Oil Exploration and Development Act of 1972” established
wealth tax, which was raised from ½ of 1% to 5% of gross sales, so that taxes, fees and the Service Contract regime for petroleum exploration and production in the country. It
charges jumped four-fold in 2014, constituting 31.2% of the sources of revenues of the was later amended in 1983 by PD 1857 providing for better incentives to contractors for
regional government. deep water exploration and development. In the Philippine Service Contract, service and
technology are furnished by the contractor for which it shall be entitled to the stipulated fee
With the increase in national excise taxes for mining from 2% to 4% in the recent tax while financing is provided by the government to which all petroleum produced shall belong,
reform law of the national government and the 5% regional wealth tax, government take but where the government is unable to finance petroleum exploration operations and if the
for mining in the ARMM is now 9% of gross sales, which is double that of what miners
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and do not necessarily reflect the policy or position of the Institute for
Autonomy and Governance or the Konrad Adenauer Stiftung.