cpbrd discussion papercpbrd.congress.gov.ph/images/pdf attachments...the 1987 constitution allots an...

Natural resources MaNageMeNt aNd FederalisM

by atty. roeNtgeN F. broNce

Issue No. 4 - March 2017

CPBRD Discussion PaperCongressional PoliCy and Budget researCh dePartment

house of rePresentatives

House of RepresentativesBatasang Pambansa, Quezon City, Metro Manila

Tel. Nos. 931-60-32 or 931-93-92Website: http://cpbrd.congress.gov.ph

CPBRD

Natural resources MaNageMeNt aNd FederalisM

The views and opinions in this report do not necessarily reflect the perspectives of the House of Representatives as an institution or its individual Members.

The 1987 Constitution allots an article- Article XII- for National Economy and Patrimony. Such

patrimony includes natural resources which the fundamental law of land also discusses in the

same Article. The rationale for the provision on natural resources and the limitation of the right to

develop the same to Filipinos- which has been carried over from the 1935 and 1973 Constitutions-

has been forcefully explained by former University of the Philippines President Vicente G. Cinco.

He declared, “It should be emphatically stated that the provisions of our Constitution which limit

to Filipinos the rights to develop the natural resources and to operate the public utilities of the

Philippines is one of the bulwarks of our national integrity. The Filipino people decided to include

it in our Constitution in order that it may have the stability and permanency that its importance

requires. It is written in our Constitution so that it may neither be the subject of barter nor be

impaired in the give and take of politics. With our natural resources, our sources of power and

energy, our public lands, and our public utilities, the material basis of the nation’s existence, in

the hands of aliens over whom the Philippine Government does not have complete control, the

Filipinos may soon find themselves deprived of their patrimony and living as it were, in a house

that no longer belongs to them.”1

Mr. Cinco’s words illuminate on the essential characteristics of the country’s natural resources

management: state-owned, permanent, inflexible, and protectionist in orientation. Our laws, rules

and policies on the utilization of our natural resources work within these parameters.

However, the proposals to change the form of government from unitary to federal have brought

to fore, once again, issues on the legal infrastructure on natural resources. These issues are vital to

the discussions on federalism because natural resources management is a dimension that overlaps

with other significant issues such as territorial boundaries, ethno-linguistic divides, governance, the

economy, political stability and security.

This paper will tackle these issues. Specifically, it will look at the present set-up- the ownership

and use of natural resources, and participation in the utilization and revenues thereof. It will also

Natural resources MaNageMeNt aNd FederalisM*

by Atty. Roentgen F. bRonce

* This paper benefitted from the inputs and overall guidance of Director General Romulo E.M. Miral, Jr., Ph.D. The research assistance of Arsenia S. Gonzales, Juan Gabrielle R. Ignacio, and Arlene L. Tuazon are also acknowledged.1 Cited in Republic vs. Quasha, G.R. No. L-30299 (1972)

2 Natural resources MaNageMeNt aNd FederalisM

discuss the concerns and challenges that the existing system faces especially on intergovernmental

relations, the reforms that have been undertaken, and consider the different views on federal

arrangements.

owNership oF Natural resources

The governing law on natural resources is the 1987 Constitution itself. The first paragraph of

Section (Sec.) 2 of Article (Art.) XII (National Economy and Patrimony) of the Constitution

states that,

“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 sixty per centum of whose capital is owned by such citizens. Such

agreements may be for a period not exceeding twenty-five years, and under such terms and

conditions as may be provided by law. In cases of water rights for irrigation, water supply,

fisheries or industrial uses other than the development of water power, beneficial use may

be the measure and limit of the grant.”

However, the Constitution does not define “natural resources”. It may be argued, though, that

using ejusdem generis2, a principle of statutory construction, the term “natural resources” as used

in the first sentence of Sec. 2 has the same characteristics as those specifically enumerated, i.e.

lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of

potential energy, fisheries, forests or timber, wildlife, and flora and fauna. What is clear, though,

and this is shown by the word “other” is that aside from those mentioned, there are other natural

resources that are subsumed under the concept. In other words, the kinds of natural resources are

not limited to the ones enumerated.

2 where a general word or phrase follows an enumeration of particular and specific words of the same class, the general word or phrase is to be construed to include or to be restricted to things akin to or resembling, or of the same kind or class as, those specifically mentioned. See Liwag vs. Happy Glen, G. R. No. 189755 (2012)

3Congressional PoliCy and Budget researCh dePartment

The extensive scope of natural resources is reiterated in Collado vs. Court of Appeals.3 In this case, the

Supreme Court defined “natural resources” as that which “includes not only timber, gas, oil coal,

minerals, lakes, and submerged lands, but also, features which supply a human need and contribute

to the health, welfare, and benefit of a community, and are essential to the well-being thereof and

proper enjoyment of property devoted to park and recreational purposes”. Collado gives us not

only an expansive definition (similar to, and flowing from the Constitutional provision); it also

provides the purposes of natural resources: to supply a human need, to contribute to the health,

welfare and benefit of a community and its well-being, and to serve as venue for recreation.

While there may be an indefinite scope of natural resources, it is explicitly clear who owns these

resources. As unambiguously provided in Sec. 2, Art. XII of the 1987 Constitution, they are

“owned by the State”. Also, their exploration, development and utilization shall be under the “full

control and supervision of the State”. This provision embodies the long-held Regalian doctrine,

a concept introduced to the Philippines by the Spaniards. As a state is a “politically organized

sovereign community independent of outside control bound by penalties of nationhood, legally

supreme within its territory, acting through a government functioning under a regime of law”,4 the

State is under our unitary set-up represented by the national government which is simply defined

as “the entire machinery of the central government, as distinguished from the different forms of

local governments”.5

In La Bugal-B’Laan Tribal Association vs. Ramos6, the Court elucidated on the meaning of “full control

and supervision.” Thus,

“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,

3 G.R. No. 107764 (2002) 4 CIR vs. Campos Rueda, G.R. No. L-13250 (1971)5 Sec. 2(2), Introductory Provisions, EO 2926 G.R. No. 127882 ( 2004)


operational, marketing, audit and other prerogatives to protect its investments and to

enable the business to succeed.

Full control is not anathematic to day-to-day management by the contractor, provided

that the State retains the power to direct overall strategy; and to set aside, reverse or

modify plans and actions of the contractor. The idea of full control is similar to that

which is exercised by the board of directors of a private corporation: the performance

of managerial, operational, financial, marketing and other functions may be delegated to

subordinate officers or given to contractual entities, but the board retains full residual

control of the business.”

The Court also had occasion to rule on who exercises this power of full control and supervision.

“Who or what organ of government actually exercises this power of control on behalf of the State?

The Constitution is crystal clear: the President.” Since the President has multifarious responsibilities,

this power of control is exercised through the various department secretaries whose very acts are,

under the Doctrine of Qualified Political Agency, acts of the President himself, unless reprobated

by the latter.7 With regard to natural resources, the three departments that are responsible are the

Departments of Environment and Natural Resources, Agriculture, and Energy.

The Department of Environment and Natural Resources (DENR) has the following mandate:

a) implement the policy of ensuring, for the benefit of the Filipino people, the full exploration

and development as well as the judicious disposition, utilization, management, renewal and

conservation of the country’s forest, mineral, land, waters, fisheries, wildlife, off-shore areas and

other natural resources, consistent with the necessity of maintaining a sound ecological balance

and protecting and enhancing the quality of the environment and the objective of making the

exploration, development and utilization of such natural resources equitably accessible to the

different segments of the present as well as future generations; and recognizing and applying a

true value system that takes into account social and environmental cost implications relative to

the utilization, development and conservation of our natural resources; and b) to be in charge

of carrying out the State’s constitutional mandate to control and supervise the exploration,

development, utilization, and conservation of the country’s natural resources.8 By virtue of

7 See Carpio vs. Executive Secretary, G.R. No. 96409 14 February (1992)8 Section 2, Chapter 1, Title XIV, Book IV, EO 292


this mandate, it is the DENR- and specifically the Mines and Geosciences Bureau (MGB)- that

implements Republic Act (RA) 7942 or the Mining Act, Presidential Decree (PD) 1899 or the

law “Establishing Small-Scale Mining As A New Dimension In Mineral Development”, RA 7046

or the “Act Creating A People’s Small-Scale Mining Program and for Other Purposes” (People’s

Small-scale Mining Act of 1991), RA 7586 or the National Integrated Protected Areas System

(NIPAS) Law and PD 705 (Revised Forestry Code).

On the other hand, the Department of Agriculture (DA) has the following main powers and

functions related to management of natural resources: a) provide integrated services to farmers,

fishermen, and other food producers on production, utilization, conservation, and disposition of

agricultural and fishery resources; and b) promulgate and enforce all laws, rules and regulations

governing the conservation and proper utilization of agricultural and fishery resources.9 Thus, the

DA- and specifically the Bureau of Fisheries and Aquatic Resources (BFAR) - is the implementing

agency for RA 8550 or the Fisheries Code, as amended by RA 10654.

Finally, the Department of Energy (DOE) has the power to a) formulate policies for the planning

and implementation of a comprehensive program for the efficient supply and economical

use of energy consistent with the approved national economic plan and with the policies on

environmental protection and conservation and maintenance of ecological balance, and provide a

mechanism for the integration, rationalization and coordination of the various energy programs

of the Government; b) to develop and update the existing Philippine energy program which shall

provide for an integrated and comprehensive exploration, development, utilization, distribution,

and conservation of energy resources, with preferential bias for environment-friendly, indigenous,

and low-cost sources for energy; and c) to establish and administer programs for the exploration,

transportation, marketing, distribution, utilization, conservation, stockpiling, and storage of energy

resources of all forms, whether conventional or nonconventional.10 It is the DOE that implements

PD 87 (indigenous petroleum), PD 972 (coal production), PD 1442 (geothermal energy), RA 7156

(Mini-Hydroelectric Power Incentive Act) and RA 9513 (Renewable Energy Act).

9 Section 3, Chapter 1, Title IV, Book IV, EO 292 10 Section 5, RA 7638


local goverNMeNt participatioN

There are three main areas by which local government units (LGUs) participate in the utilization

of natural resources. The first is when LGUs are consulted by the national government agency

before a program or project on the utilization of these resources is implemented. Sec. 26 of RA

7160, otherwise known as the Local Government Code (LGC) of 1991, is clear on this matter.

“Section 26. Duty of National Government Agencies in the Maintenance of Ecological Balance. - It

shall be the duty of every national agency or government-owned or controlled corporation

authorizing or involved in the planning and implementation of any project or program that

may cause pollution, climatic change, depletion of non-renewable resources, loss of crop

land, rangeland, or forest cover, and extinction of animal or plant species, to consult with

the local government units, nongovernmental organizations, and other sectors concerned

and explain the goals and objectives of the project or program, its impact upon the people

and the community in terms of environmental or ecological balance, and the measures that

will be undertaken to prevent or minimize the adverse effects thereof.”

Not only should consultations be made, the LGC even goes further to require the prior approval

of the sanggunian concerned. This is explicit in Sec. 27 thereof that says, “No project or program

shall be implemented by government authorities unless the consultations mentioned in Sections 2

(c) and 26 hereof are complied with, and prior approval of the sanggunian concerned is obtained.”11

These twin provisions imply that utilization- as an attribute of ownership of natural resources

by the State- does not mean that the national government can simply take these resources and

proceed with the use thereof. The mechanisms enshrined in these provisions prevent the national

government from coming up with a unilateral decision on the use of these resources.

The second point of participation is through regulation, best illustrated through the power of

local sanggunians to pass ordinances. Among the powers and functions of the sanggunians (of the

municipalities, cities and provinces) is to “approve ordinances and pass resolutions necessary for

11 Section 2 (c ) refers to “the policy of the State to require all national agencies and offices to conduct periodic consultations with appropriate local government units, nongovernmental and people’s organizations, and other concerned sectors of the community before any project or program is implemented in their respective jurisdictions.”


an efficient and effective [local] government, and in connection shall…protect the environment

and impose appropriate penalties for acts which endanger the environment…”12

Municipalities and cities can also “approve ordinances which shall ensure the efficient and effective

delivery of the basic services and facilities as provided for under Sec. 17 of [the] Code, and in addition

to said services and facilities, shall…provide for the establishment, maintenance, protection, and

conservation of communal forests and watersheds, tree parks, greenbelts, mangroves, and other

similar forest development projects”13. Provinces, on the other hand, can “adopt measures and

safeguards against pollution and for the preservation of the natural ecosystem in the province, in

consonance with approved standards on human settlements and environmental sanitation”14. These

provisions are the ones cited by local governments which have imposed moratoriums or bans on

mining.

In addition, the RA 7942 or the Mining Act specifically provides that municipalities and cities can

collect annually, Occupation Fees from “any holder of a mineral agreement, financial or technical

assistance agreement or exploration permit on public or private lands”15. Such fees “shall be paid

on the date the mining agreement is registered with the appropriate office and on the same date

every year thereafter. It shall be paid to the treasurer of the municipality or city where the onshore

mining areas are located or to the Director in case of offshore mining areas.”16 Furthermore,

LGUs also impose various taxes and charges such as real property taxes, business taxes, sand and

gravel taxes, extraction fees, wharfage fees and permit fees.

Finally, LGUs participate through the share of proceeds from the utilization of national wealth.

Sec. 7, Art. X of the 1987 Constitution provides that local governments “shall be entitled to an

equitable share in the proceeds of the utilization and development of national wealth within their

respective areas, in the manner provided by law, including sharing the same with inhabitants by

way of direct benefits”. This is a new provision (i.e. absent in the previous Constitutions) that

underscores the thrust to enhance local autonomy. Specifically, the fundamental law has awarded

12 Sections 447( 1)(vi), Title II (The Municipality); 458 (1) (vi), Title III (The City); 468 (1)(vi), Title IV (The Province), Book III, RA 716013 Sections 447 (5)(i), 458 (5)(i), Book III, RA 716014 Section 648 (4)(i), Title IV, Book III, op. cit.15 Sec. 86, RA 9742 (Mining Act)16 Sec. 88, op.cit.


LGUs a role in the utilization of resources which are found within their respective jurisdictions. It

is noted, though, that this provision used the term “national wealth” instead of “natural resources”

under Art. XII. However, this part of the Constitution does not define what is, or the scope of,

“national wealth”, just like the lack of definition for “natural resources” under Art. XII.

The manner of sharing that is mandated to be provided by law is contained in the LGC. Sec. 18

(Power to Generate and Apply Resources) states that LGUs shall have “an equitable share in the

proceeds from the utilization and development of the national wealth and resources within their

respective territorial jurisdictions including sharing the same with inhabitants by way of direct

benefits”. The part that operationalizes this general provision is Chapter II (Secs. 289-294) of Title

III, Book II of the law, the portion allocated solely for the share of LGUs on national wealth.

Sec. 289 of the LGC is the general provision and merely reiterates the constitutional command.

Thus,

“Section 289. Share in the Proceeds from the Development and Utilization of the National Wealth.

- Local government units shall have an equitable share in the proceeds derived from the

utilization and development of the national wealth within their respective areas, including

sharing the same with the inhabitants by way of direct benefits.”

Like the Constitution, however, the LGC does not define the term “natural resources” or “national

wealth”. Fortunately, the Implementing Rules and Regulations (IRR) of the law have provided the

details. Under Art. 386(b) of the IRR of the LGC, “national wealth” means “all natural resources

situated within the Philippine territorial jurisdiction including lands of the public domain, waters,

minerals, coal, petroleum, mineral oils, potential energy sources, gas and oil deposits, forest

products, wildlife, flora and fauna, fishery and aquatic resources, and all quarry products”. It has

to be stressed though, that as a mere rule, it may be abandoned anytime or may be supplanted by

law, a built-in weakness that had consequences, as will be discussed later. Nevertheless, as a rule, it

has the force and effect of law. The entire gamut and enumeration of natural resources shows its

all-encompassing scope, and the proceeds of the utilization of each and every resource in the list

is required by law to be shared to local government units.


What composes these proceeds? The law does not define this term either but the IRR supplies the

meaning. The word refers to: “(1) Mining taxes, royalties, forestry and fishery charges, and such

other taxes, fees, or charges, 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. (2) Administrative charges enumerated herein accruing

to the National Government whether collected by the National Government collecting agencies

or, in certain cases, by LGUs. (3) Proceeds from the development and utilization of national

wealth where the LGU actually collects and automatically retains its share of at least forty percent

(40%) of such proceeds shall not form part of the revenue base in the computation of the forty

percent (40%) share.”17 It is unambiguous that such proceeds include excise taxes, as imposed

under Sec. 151 of the National Internal Revenue Code (NIRC).

The equitable share from the abovementioned proceeds and how they shall be expended are

provided under Secs. 290-293 of the same law. Sec. 290 expressly provides for what is that equitable

share: 40%. Thus,

“Section 290. Amount of Share of Local Government Units. - Local government units shall,

in addition to the internal revenue allotment, have a share of forty percent (40%) of the

gross collection derived by the national government from the preceding fiscal year from

mining taxes, royalties, forestry and fishery charges, and such other taxes, fees, or charges,

including related surcharges, interests, or fines, and from its share in any co-production,

joint venture or production sharing agreement in the utilization and development of the

national wealth within their territorial jurisdiction.”

On the other hand, Secs. 291-292 are the provisions that are applicable when a government agency

or a government-owned or –controlled corporation is engaged in the utilization of national

wealth. Sec. 292, in particular, governs the situation when a natural resource is located across

LGU boundaries.

“Section 291. Share of the Local Governments from any Government Agency or Owned or Controlled

Corporation. - Local government units shall have a share based on the preceding fiscal year

17 Art. 387, IRR of the LGC of 1991


from the proceeds derived by any government agency or government-owned or controlled

corporation engaged in the utilization and development of the national wealth based on the

following formula whichever will produce a higher share for the local government unit:

(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, forestry and fishery charges and

such other taxes, fees or charges, including related surcharges, interests, or fines the

government agency or government owned or controlled corporation would have

paid if it were not otherwise exempt.”

“Section 292. Allocation of Shares. - The share in the preceding Section shall be distributed in

the following manner:

(a) Where the natural resources are located in the province:

(1) Province - Twenty percent (20%);

(2) Component City/Municipality - Forty-five percent (45%); and

(3) Barangay - Thirty-five percent (35%)

Provided, however, That where the natural resources are located in two (2) or more provinces, or

in two (2) or more component cities or municipalities or in two (2) or more barangays, their

respective shares shall be computed on the basis of:

(1) Population - Seventy percent (70%); and

(2) Land area - Thirty percent (30%)

(b) Where the natural resources are located in a highly urbanized or independent

component city:

(1) City - Sixty-five percent (65%); and

(2) Barangay - Thirty-five percent (35%)

Provided, however, That where the natural resources are located in such two (2) or more

cities, the allocation of shares shall be based on the formula on population and land area as

specified in paragraph (a) of this Section.”


The express intent of the foregoing provisions is reiterated in the Mining Act. Sec. 82 of the law

mandates that the government share shall be allocated in accordance with Secs. 290 and 292 of the

LGC. As far as occupation fees are concerned, the Mining Act says that “[t]hirty per centum (30%)

of all occupational fees collected from the holders of mining rights in onshore mining areas shall

accrue to the province and seventy per centum (70%) to the municipality in which the onshore

mining areas are located. In a chartered city, the full amount shall accrue to the city concerned”18.

Sec. 293 of the LGC mandates the manner in which the proceeds shall be released: that is in

accordance with Sec. 286, on the automatic release of the Internal Revenue Allotment (IRA).

“Section 293. Remittance of the Share of Local Government Units. - The share of local

government units from the utilization and development of national wealth shall be remitted

in accordance with Section 286 of this Code: Provided, however, That in the case of

any government agency or government-owned or controlled corporation engaged in the

utilization and development of the national wealth, such share shall be directly remitted to

the provincial, city, municipal or barangay treasurer concerned within five (5) days after the

end of each quarter.”

The operative word in Sec. 286 is “automatic” which the Supreme Court in Province of Batangas vs.

Romulo19 construed as “something mechanical, spontaneous and perfunctory”. Further, the Court

emphasized that, “[a]s such, the LGUs are not required to perform any act to receive the just share

accruing to them from the national coffers”.

Finally, Sec. 294 provides for how the proceeds shall be spent by the LGUs. Thus,

“Section 294. Development and Livelihood Projects. - The proceeds from the share of local

government units pursuant to this chapter shall be appropriated by their respective

sanggunian to finance local government and livelihood projects: Provided, however, that at

least eighty percent (80%) of the proceeds derived from the development and utilization of

hydrothermal, geothermal, and other sources of energy shall be applied solely to lower the

cost of electricity in the local government unit where such a source of energy is located.”

18 Sec. 8819 G.R. No. 152774 (2004). See also Pimentel vs. Aguirre, 336 SCRA 201 (2000)


issues oN the preseNt structure

There are several issues regarding the dimensions of the present system. Some of these specific

matters require harmonization or rationalization of contending policies and laws. A number,

however, are fundamental challenges that go beyond mere legislation.

Duplication of functions

On top of these concerns is duplication of functions. Under our unitary set-up, the national

government through the Legislative and the Executive branches set the overall policy. However, as

brought about by enhanced local autonomy through the LGC, each LGU may also pursue its own

autonomous direction in certain areas.

This is most evident in the field of mining regulation where both the national and local governments

exercise their respective jurisdictions. Since the State owns mineral resources, the government’s

inherent police power has primary sway over local legislation, which is merely delegated power.

Yet, there is also no law that prevents local governments from passing ordinances that impose

stricter standards on projects and programs that affect the environment. As previously stated,

the mandate of LGUs comes from the LGC, no less, specifically the provisions enumerating the

power of the sanggunians under Book III.

Duplication of functions has resulted in clear conflicts between the national and local governments.

Under previous national administrations, the mining policy is more permissive. Yet, notwithstanding

this national policy, local governments have pursued anti-mining ordinances. The latest data show

that even before the present leadership at the DENR pursued a national anti-mining policy, there

are sixteen (16) provinces with anti-mining ordinances, forty-seven (47) provinces which contain

component units that have passed comprehensive or limited anti-mining ordinances, eighty four

(84) cities and municipalities with similar bans, and ninety (90) municipalities or cities that have

component barangays that have expressed anti-mining positions. The following table shows the

LGUs that have articulated their sense against mining:


table 1lgus with coMpreheNsive or liMited aNti-MiNiNg ordiNaNces/resolutioNs

1

Region Province Municipality/City Barangay No. Title/Main Contents Date Passed

CAR Kalinga Pasil 2011-01 The Revised Revenue Code of Pasil

CAR Benguet Mankayan Bulalacao 12, S 2011

Resolution Endorsing the Herein Resolution No. 1 Series 2011 of the Barangay Bulalacao Movement (BBM) for the Protection of Environment Incorporated Tranlated in Ilocano Version strongly Opposing the Mining Activities of Far Southeast Gold Resources, Inc. (FSGRII), Lepanto Consolidated Mining Company (LCMCO) and any other Mining Company to Operate within the Territorial Limit of Barangay Bulalacao, Mankayan, Benguet

15 January

2011

CAR Benguet Mankayan 2012-09

Informing all Concerned that the Municipal Government has not Endorsed any Drilling Activity of the Goldfields-FSEGRI within the Municipality of Mankayan

7 February 2012

CAR Benguet Mankayan Tabio 96, s 2012

A Resolution condemning the 81o (Degrees) Drilling Inclination of the FSE-Resources Inc. and the Quest Exploration Drilling Inc. Conducting Surface Drilling at Sitio Madayman, Tabio, Mankayan, Benguet

10 January

2012

CAR Benguet Mankayan Balili 05-2012

A Resolution Informing the Office of the Department of Environment and Natural Resources (DENR), Mines and Geosciences Bureau (MGB), NCIP and other Concerned Agencies the Stand of the Balili Barangay Council Members Regarding Future Drilling Activity of any Mining Company

18 January

2012

CAR Benguet Kibungan Palina

CAR Benguet Kibungan Madaymen

CAR Benguet Kibungan Lubo

CAR Abra Tubo

CAR Mt Province Bauko

CAR Mt Province Tadian

CAR Mt Province Sagada

1 Ilocos Sur Cervantes 251, S 2011 Resolution Requesting the DENR, MGB to Deny Any New Mining Application for Mining Quarrying in the Municipality of Cervantes

2 Cagayan Sta. Ana

2 Cagayan Ballesteros

2 Cagayan Sanchez Mira

2 Nueva Vizcaya Bagabag

2 Nueva Vizcaya Diadi

2 Nueva Vizcaya

3 Nueva Ecija Gabaldon

3 Zambales Masinloc

3 Aurora

4A Batangas San Juan

4A Batangas Batangas City


1

4B Romblon 001-2011 Moratorium on Metallic Mining in the Province of Romblon

4B Marinduque 379 S 2005 Declaring a Fifty (50)-year Large-Scale Mining Moratorium in the Province of Marinduque

28 October

2006 4B Marinduque Mogpog

4B Palawan Brooke’s Point Ipilan 54-2011

A Resolution Rejecting and Condemning the Sangguniang Bayan of Brooke’s Point Recent Decision of Favorably Endorsing the Operations of Lebach Mining Corporation due to the Absence of the Necessary Documents Showing that Social Acceptability for Such Operations Has Been Duly and Legally Obtained.

29 December

2011

4B Palawan Brooke’s Point Ipilan 01-2012

A Resolution Supporting the Position Paper of Barangay Captain Jonathan Z. Lagrada Against the Anomalies Behind the Favorable Endorsement of Lebach Mining Corporation by the Sangguniang Bayan of Brooke’s Point

13 January

2012

4B Palawan Puerto Princesa City

5 Masbate 033-2011 Opposition to the Proposed Mining Activities of Filminera Mining Corp.

5 Camarines Norte

Jose Panganiban 295-2011

A resolution stongly appealing to the department of environment and natural resources (denr) thru secretary ramon jesus p. Paje to revoke/cancel mpsa 308-2009-v covering an approximate area of 153.7478 hectares situated in sitio dawahan, barangay nakalaya, jose panganiban, camarines norte

19 April 2011

5 Sorsogon Matnog Balocawe

6 Negros Occidental Himamaylan

Opposing the Coastal Exploration Activities of Silver Bell Mining and Development Corp. & Mt. Mogan Resources and Development

6 Negros Occidental

6 Iloilo Lemery, Ajuy 10-2011

Resolution Vehemently Opposing the Mining Operations by the Pacific Ore and Mineral Exploration Corporation in Barangay Badiangan, Ajuy and to Demand the Cancellation of the Permit

2 May 2011

6 Iloilo

6 Capiz Mambusao 2011-81

6 Capiz 163, S2011

A Resolution Upholding Ordinance No. 6, Series of 1999 “An Ordinance Declaring a Moratorium on all Large-Scale Mining Activities and the Processing of Applications for the same in the Province of Capiz for a Period of Fifteen years and Imposing Penalties for Violation Thereof” and its Amendments Extending the Moratorium for up to Fifty (50) years

10 August 2011

6 Capiz 06, S2011

Resolution Endorsing in General the Conduct of Mining Operation by the Legally Permitted Mining Company Teresa Marble Corporation (TMC) and/or Capmin Enterprise (CAPMIN) Its Service Contractor, Partner and Service Providerm in Barangay Canapian, Ma-ayon, Province of Capiz


1

6 Capiz 42, S2011

A Resolution Strongly Supporting the Resolution Adopted by the Sangguniang Barangay of Barangay Canpian Allowing Teresa Marble Corporation and their Assigns to Undertake/Conduct Mining Operation in their Barangay

6 Antique Sebaste 35-2012

Resolution Expressing Opposition to the Application of Mr. Hernan D. Biron for the Exploration of Basalt in Barangays Abiera and Bacalan, Sebaste, Antique

6 Antique

6 Aklan

6 Guimaras

7 Cebu Mingianilla

7 Cebu Naga

7 Cebu Medellin

7 Cebu Consolacion

7 Bohol Loon

7 Bohol Maribojoc

7 Bohol Albuquerque

7 Bohol Baclayon

7 Bohol Trinidad

7 Bohol Guindulman

7 Siquijor Larena

7 Siquijor Maria

7 Siquijor Siquijor

7 Siquijor San Juan

7 Siquijor E. Villanueva

7 Negros Oriental Siaton

8 Biliran Almeria 43-2011

A Resolution opposing the Starrex Mining Application for Exploration Permit with the Mining and Geosciences Bureau of the Department of Environment and Natural Resources (14 March 2011)

8 Leyte Abuyog 366 S2005

A Resolution to Disallow all Mining Exploration/Application Activities in the Municipality of Abuyog, Leyte for a period of 25 years

8 Leyte Palompon 432-290310

Adopting Municipal Ordinance Entitled “An Ordinance Declaring a Twenty-Five Year Moratorium on all Forms of Onshore Mining in the Municipality of Palompon, Province of Leyte and Providing Exceptions and Penalties Thereof”

29 March 2010

8 Leyte 2011-352 A Resolution Banning Offshore Mining within the Territorial Waters of the Province of Leyte

5 July 2011


1

8 Leyte Tacloban City 2012-225

A Resolution Earnestly Requesting the Department of Environment and Natural Resources (DENR) Through the Honorable Secretary Ramon J.P. Paje, the Mines and Geosciences Bureau (MGB) Central office Through Director Leo L. Jasareno, and the Mines and Geosciences Bureau (MGB) Regional Office VII through its Regional Director Roger A. De Dios, to strictly Enforce R.A. 7942 and other Related Laws, as well as to Observe Local Ordinances and Resolutions Related to Mining in the Province of Leyte for the General Welfare of its Constituents

8 Leyte Tolosa 09, S 2011 Integrated Barangay Irrigators Association opposing the Application of Northern Access Mining, Inc.

8 Leyte Inopacan

8 Leyte Hindang

8 Leyte Abuyog

8 Leyte Capoocan

8 Leyte Carigara

8 Leyte Baybay City

8 Leyte Leyte

8 Southern Leyte Hinunangan

8 Samar Catbalogan

8 Samar Jiabong

8 Eastern Samar Lawaan

8 Eastern Samar Hernani

8 Eastern Samar Salceda

9 Zamboanga del Norte Leon B. Postigo 041-11

Resolution Denying Endorsement and Expressing Vehement Opposition to the Application of TVI Resource Development Philippines, Inc. for Mining Exploration within the Municipality of Leon B. Postigo, Zamboanga del Norte

9 Zamboanga del Norte Rizal

9 Zamboanga Sibugay Tungawan 16-155-11

A Resolution Requesting the Mines and Geo-sciences Bureau, DENR IX, 2nd Floor, GL Building.. To disallow or Deny All Mining Exploration Permit in the Municipality of Tungawan, Zamboanga Sibugay

22 February

2011

9 Zamboanga Sibugay Alicia

9 Zamboanga del Sur Bayog 529, s2011

Opposition to the construction of mine access road by TVI Resource Development, Inc in Sitio Balabag


A Resolution Respectfully Requesting Hon. Leo L. Jasareno, Director, Mines and Geosciences Bureau, North Avenue, Diliman, Quezon City to effect the Cancellation of the MPSA NO. 086-91-IX of the Zamboanga Mineral Corporation/TVI Resource Development Phils., Inc.

26 Jul 2011


1


A Resolution Expressing the Opposition of the Local Government Unit of Bayog, Zamboanga del Sur to the Operation of TVI-Resource Development Corporation under the MPSA of Zamboanga Mineral Corporation

26 April 2011

9 Zamboanga del Sur Bayog MO No. 11-

92-11

An Ordinance Protecting and Conserving the Integrity of the Land and Water Resources in the Municipality of Bayog, Zamboanga del Sur

18 June 2011

9 Zamboanga del Sur Bayog 639, S 2012

A Resolution Vehemently Interposing Objection as to the Mining Operation of the TVI Resource Development Philippines, Inc. in the Territorial Jurisdiction of the Municipality of Bayog, Province of Zamboanga del Sur

9 Zamboanga del Sur Dumingag

9 Zamboanga del Sur Mahayag

10 Bukidnon 2011-412 (11th SP)

Resolution Expressing the Sense of Elation of the Sangguniang Panlalawigan of the Province of Bukidnon on the Decision of President C. Aquino III, to Impose a Mining Ban especially in the Province of Bukidnon

10 Cagayan de Oro City

11 Davao del Sur Matanao 16-141,

s2011

Informing the Department of Environment and Natural Resources and the Mines and Geo-sciences Bureau that Barangay Colonsac and Donganpekong… Strongly opposing entry of any local or foreign… Mining activity in the area (NO COPY, c/o MGB Letter dated 12 April 2011)

28 February

2011

11 Davao del Sur Matanao

12 Cotabato Arakan

12 Cotabato Alamada

12 Cotabato Malapatan

12 South Cotabato

12 North Cotabato

12 Sarangani Kiamba

12 Sarangani Glan

12 Sultan Kudarat

13 (CARAGA)

Surigao del Sur Cantilan 2009-88

A Resolution Declaring Full-Support to the petition for the Cancellation of the MPSA No. 016-93-X granted to Ventura Timber Corporation/Marcventures Mining and Development Corporation and MPSA No. 015-93-X of Carac-an Development Corporation with prayer for Preliminary Mandatory Injuction and/or Temporary Restraining Order filed by the Cantillan Irrigation System Federation of Irrigators Association, to protect the interest of the Municipality of Cantillan as grantee of the mini-hydro electric power development operating contract No. 2005-0021 dated Dec. 29, 2005.

13 Surigao del Sur Cantilan

13 Surigao del Sur Madrid


1

13 Surigao del Sur Tandag

13 Surigao del Sur Marihatag

13 Surigao del Sur Cortes

13 Surigao del Sur Carmen

13 Surigao del Norte Placer

13 Dinagat Islands Loreto 011-2012

Resolution Earnestly Requesting Hon. Alilo Ensomo, Jr., Regional Director of Mines and Geosciences Bureau, Surigao City for the Immediate Pull-out of Security Personnel of Global Titans Mining Corporation in Barangay Esperanza, Municipality of Loreto, Province of Dinagat Islands for Lack of Business Permit to Operate in the said Area.

26 March 2012

13 Dinagat Islands Loreto 012-S-2011

Barangay Resolution Interposing Objection to the Proposed or Planned Nickel/Chromite Mining Development and Operation of Minahang Bayan ng San Jose Multi-Purpose Cooperative who have been granted an MPSA whose Mining Claim is Just a Few Kilometers over and above Barangay Esperanza Proper

26 November

2011

13 Dinagat Islands Loreto 068-2011

Resolution Earnestly Endorsing Barangay Esperanza’s Objection to the Proposed Nickel and Chromite Mining Development and Operation of Minahang Bayan ng San Jose Multi-Purpose Cooperative who has been granted an MPSA and whose mining claim is situated in Barangay Esperanza, Municipality of Loreto, Province of Dinagat islands

5 December

2011

13 Agusan del Sur Rosario Sta. Cruz 2011-03

Resolution/Petition withdrawing the Signatures of members of the Sectoral Council of Maniga-on of Sta. Cruz, Rosario, Agusan del Sur who signed the Memorandum of Agreement Executed by and between Bernster Exploration and Industrial Corp. (Claimowner) Alcorn Gold Resources Corp./Philsaga/Phsarned Mining Corporation (Operator) and CAMMPACAMM Ancestral Domain Manobo Tribal Association of Rosario, Agusan del Sur and the National Commission on Indigenous Peoples Represented by its Regional Director in January 22, 2006

8 July 2011

13 Agusan del Sur

San Francisco (watershed area)

13 Agusan del Norte Tubay 2011-01

A Resolution Earnestly Requesting Hon. Ramon J. P. Paje, Secretary, Department of Environment and Natural Resources (DENR) for the Revocation/Cancellation of the Mining claim of Rosalinda Deloso/Corplex and for the Disapproval of Any Subsequent Application for a (Mineral) Production Sharing Agreement (MPSA) with the DENR

3 January 2011

13 Agusan del Norte Jabonga

Dinarawan Indigenous Peoples Organization

Resolusyon sa mga Mamanwa sa Dinarawan, San Pablo, Jabonga, Agusan del Norte nga dili magpasulod sa proyekto nga pagmina particular sa nahisakop sa among giangkon nga yutang kabilin

13 Agusan del Norte Tubay


Source of basic data: MGB, DENR

1

13 Agusan del Norte Kitcharao

13 Agusan del Norte Buenavista

One primary example of a conflict between the national government and the LGU is the issue

over the Tampakan copper and gold mine, a $6-Billion discovery located in South Cotabato,20 and

which is considered by Mining Journal as “one of the biggest finds in Asia in decades”21. While

environmental clearances were obtained, the provincial leadership of South Cotabato has not

withdrawn its ban imposed since 2010, although it has been reportedly advised of the ordinance’s

inconsistency with the Mining Act.22

There were other disagreements, but none was more tense-filled than when former President

Aquino moved to clip the discretion exercised by local executives. When a planned Executive

Order (EO) that would set an overall national mining policy, and stress the primacy of local laws

over ordinances (which essentially means that the national government can override anti-or pro-

mining ordinances of LGUs), Governors threatened to challenge the order before the Supreme

Court. Then Albay Governor Salceda was quoted as saying: “We consider that provocative. In

other words, it’s not conducive to a productive national conversation on the policy. It will breed

inequality on income and assets. It will destroy the countryside. It is definitely anti-rural, that EO

is anti-LGU.”23 President Aquino, nevertheless, issued a more acceptable policy in EO 79.24 Its

relevant portion on the power of LGUs was toned-down. Sec. 12 goes,

“Section 12. Consistency of Local Ordinances with the Constitution and National Laws/LGU

Cooperation. The Department of the Interior and Local Government (DILG) and the LGUs

20 http://news.abs-cbn.com/business/02/20/13/tampakan-project-still-faces-open-pit-mining-ban-scotabato last accessed January 17, 201721 Philippine Poverty Environment Initiative (PPEI), Review of Collection and Distribution of Revenues from Natural Resources ( 2012)22 Ibid. citing “Gov sticks to open pit mining ban”, Philippine Daily Inquirer, December 12, 201023 40 Governors oppose new Aquino mining policy- Salceda, http://business.inquirer.net/67135/40-governors-oppose-new-aquino-mining-policy—salceda, last accessed 18 January 201724 Institutionalizing and implementing reforms in the Philippine mining sector providing policies and guidelines to ensure environmental protection and responsible mining in the utilization of mineral resources


are hereby directed to ensure that the exercise of the lattter’s powers and functions is

consistent with and conform to the regulations, decisions, and policies already promulgated

and taken by the National Government relating to the conservation, management,

development, and proper utilization of the State’s mineral resources, particularly RA No.

7942 and its implementing rules and regulations, while recognizing the need for social

acceptance of proposed mining projects and activities.

LGUs shall confine themselves only to the imposition of reasonable limitations on mining

activities conducted within their respective territorial jurisdictions that are consistent with

national laws and regulations.

Concerned government agencies, in particular the DENR, the Department of Budget

and Management (DBM), and the Department of Finance (DOF), are hereby directed

to ensure the timely release of the share of LGUs in the National Wealth pursuant to

Section 289 of RA No. 7160, or the Local Government Code of 1991. These agencies are

likewise directed to study the possibility of increasing LGUS’ share as well as granting them

direct access similar to existing arrangements with the Philippine Export Zone Authority

(PEZA).

LGUs, DENR, and the MGB working together shall strictly implement RA No. 7076, to

ensure the protection of the environment, address various issues in small-scale mining,

and ensure that violators thereof are subjected to appropriate administrative and criminal

liability.” (underscoring supplied)

Thus, the new EO stressed what is already public knowledge: the limited power of LGUs, and the

requirement that local regulations must be consistent with national laws. While it clearly took a less

adversarial tone, and may have prevented a clash between the national government that wanted a

harmonized central and comprehensive policy, and the local governments that desired to enhance

their autonomy, it still stressed the obvious: that national laws still trump local ordinances on

policy-making. Nonetheless, as an assent to the LGC, the new EO emphasized the timely release

of the share of LGUs from the utilization of national wealth.

It is vital to note that the dissonance is not only vertical, i.e. national and local, but also horizontal,

i.e. across LGUs. Since each LGU has its own say on the matter, then the ordinances of each

unit substantially differs from the other similar unit. For instance, in Cebu, it is observed that


its Environmental Code shows an “active stance on the environmental impact of mining and

quarrying activities” while “considering the need to integrate environmental policies with social

and economic dimensions”25. This Code emphasizes coordination with stakeholders without

prohibiting mining. On the other hand, the Resolutions of the Sangguniang Panlalawigan of Rizal

were explicitly prohibitive as it has declared a moratorium on the acceptance, processing, and

approval of new applications for all forms of permits, contracts, operating agreements, and

clearances on quarrying and mining activities in the province,26 as well as the renewal of all

permits, contracts and operating agreements.27 Nevertheless, both resolutions defer to the final

determination of the DENR on the province’s carrying capacity.28 Another province, Bulacan,

has pursued a limiting but not prohibitive stance, as it has mandated the issuance of a Provincial

Environmental Compliance Certificate (PECC) before business permits are issued, and prior to

operations. Yet, it also gives the Governor the power to declare certain areas as “environmentally

critical” upon action by the provincial sanggunian.

Further, and more importantly, it is important to highlight that there are also pockets of

disconnection between the policy of an LGU and its component units. As reflected in Table 1, there

are provinces where there are no forms of bans on mining, although some of the municipalities

thereof have passed ordinances on mining prohibition. Even certain barangays of a number of

municipalities have expressed their positions on this issue. Take for example Region 1, where only

the municipality of Cervantes, Ilocos Sur has passed a resolution to request DENR to prohibit

mining in the area, while a province-wide or even region-wide prohibition is unavailing. This

disconnection illustrates the overlapping powers of the different LGUs, a prevalent limitation of

the LGC.

FragMeNtatioN oF policies Another issue is about the fragmented quilt of legislations and rules, even as to one sector only-

mining.

25 The Third PH-EITI Report (FY 2014). p.12526 Resolution No. 223, series of 2013, as cited in The Third PH-EITI Report, p. 12727 Resolution No. 243, series of 2013, loc. cit.28 Ibid.


Take for example the case of small-scale mining. The constitutional command is clear: “Congress

may, by law, allow small scale utilization of natural resources by Filipino citizens…”29 This

provision led to the different treatments of large-scale and small-scale mining. The legal regime

for large-scale mining is governed by the Mining Act of 1995, which replaced the Mining Law;

while small-scale mining is governed by two laws: Presidential Decree (PD) 1899 and RA 7076.

Under RA 7076, “small-scale mining” refers to “mining activities which rely heavily on manual

labor using simple implement and methods and do not use explosives or heavy mining equipment”.

These miners are required to pay all taxes, royalties and government production shares to the

government. The collections are all subject to the proceeds-sharing provisions of the LGC,

although reports say that these small miners generally do not pay the taxes due the government.30

The two laws for small-scale mining are implemented by various IRRs: Mines Administrative

Order (AO) No. MRD-41, Series of 1984, Department AO No. 28 and Mineral Reservations

Development Board AO Nos. 3 and 3A, as provided under Department AO No. 96-40 for PD

1899 and Department AO No. 44, Series of 1992 for the latter. DENR Memorandum Circular

No. 2007-07 has provided that small-scale mining operations not declared as People’s Small-

Scale Mining Areas (PSSMAs) or Minahang Bayan shall be covered by Small-Scale Mining Permits

(SSMPs) under PD 1899.

The existence of two regimes has raised grave concerns. For one, there are issues about the

relationship of the LGU to the DENR. Under PD 1899, and as implemented by the IRRs, it is the

Regional Director who issues permits. Under RA 7076, it is the “Provincial/City Mining Regulatory

Board” or PMRB/CMRB whose function is, inter alia, to award contracts to small-scale miners.31

The Board shall be composed of the DENR representative as Chairman and the representative of

the governor or city mayor, as the case may be, and one (1) small-scale mining representative, one

(1) big-scale mining representative, and the representative from a non-government organization

who shall come from an environmental group, as members.32 Having a PMRB/CMRB that is

headed by the DENR reflects the policy of national government supremacy over the policy and

direction of the industry, which is of course, consistent with the constitutional mandate of state

29 3rd pa., Section 2, Art. XII 30 PPEI, p. 14 31 Sec. 24, RA 707632 PPEI, p. 14


ownership of natural resources. However, while conceptually this means that the DENR is on

top of the body, there are references that claim that the boards are under the influence of the

Governor or the Mayor.33

A question arose on what governs the issuance of permits in small-scale mining in mineral

reservations. DENR AO No. 96-40 addressed this, thus,

“Sec. 103. General Provisions. Applications for Small-Scale Mining Permits shall be

filed with the Provincial Governor/City Mayor through the concerned Provincial/City

Mining Regulatory Board for areas outside the Mineral Reservations and with the Director

through the Bureau for areas within mineral reservations. x x x”

This rule magnified the confusion on the regime for small-scale mining, and highlighted once

again, the interrelated, yet, fragmented roles of LGUs and the DENR. EO 79 tried to clarify the

issue by providing that small-scale mining operations shall be undertaken only within the areas

declared as PSSMAs, thus, putting small-scale mining under the ambit of RA 7076.34

Second, under PD 1899, holders of permits shall, during the term of the permit or license, be

exempt from payment of all taxes, except income tax,35 which is again, not the case under RA

7076.

In connection with this, it may be recalled that under the IRR of the LGC, national wealth includes

“all natural resources situated within the Philippine territorial jurisdiction including lands of the

public domain, waters, minerals, coal, petroleum, mineral oils, potential energy sources, gas and

oil deposits, forest products, wildlife, flora and fauna, fishery and aquatic resources, and all quarry

products.” (underscoring supplied). The LGC, however, treated utilization of quarry products

differently, as it provided a section on it: Section 138. The provision goes:

“Section 138. Tax on Sand, Gravel and Other Quarry Resources. - The province may levy and

collect not more than ten percent (10%) of fair market value in the locality per cubic

33 Sec. 25, op. cit. 34 Sec. 11 (b)35 SECTION 4. The small scale mining permittee/licensee shall, during the term of the permit or license, be exempt from payment of all taxes, except income tax.


36 Art. 227, IRR, RA 7160

meter of ordinary stones, sand, gravel, earth, and other quarry resources, as defined under

the National Internal Revenue Code, as amended, extracted from public lands or from

the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial

jurisdiction.

The permit to extract sand, gravel and other quarry resources shall be issued exclusively by the

provincial governor, pursuant to the ordinance of the sangguniang panlalawigan.

The proceeds of the tax on sand, gravel and other quarry resources shall be distributed as follows:

(1) Province - Thirty percent (30%);

(2) Component City or Municipality where the sand, gravel, and other quarry

resources are extracted - Thirty percent (30%); and

(3) Barangay where the sand, gravel, and other quarry resources are extracted - Forty percent

(40%).”

It must be noted that aside from being a provision on local taxing power, it is also on local

regulatory power as it empowers the Governor, and exclusively the Governor, to issue the permit,

upon the ordinance of the Sangguniang Panlalawigan. Thus, as to quarry resources “such as but

not limited to marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate”36, it is the

Governor alone, and not any board, including the PMRB, that can issue permits. Certainly, this is

inconsistent with the sense of the Mining Act or even RA 7076. The Mining Act accommodated

this special treatment of quarry resources by the LGC but still stressed the role of the PMRB by

requiring an applicant to apply to the provincial/city mining regulatory board for a quarry permit

before the Governor issues the permit, a move that added another layer to an already tedious

procedure of obtaining permits.

Fiscal MaNageMeNt issues

It is the fiscal side, however, that is the most contentious area of the present set-up. As to the

particular aspects of fiscal management, issues are on inconsistent and contending policies, the

design of the structure, management of proceeds, and distribution of the same.


Different Regimes

Remember that the IRR of the LGC defined “national wealth” as that composite which includes

“all natural resources situated within the Philippine territorial jurisdiction including lands of the

public domain, waters, minerals, coal, petroleum, mineral oils, potential energy sources, gas and

oil deposits, forest products, wildlife, flora and fauna, fishery and aquatic resources, and all quarry

products” (underscoring supplied). Notwithstanding this definition (which is contained in a mere

rule, but should be followed nevertheless), some legislations or agency practice took some of these

forms of national wealth away from the ambit of the LGC.

This is illustrated by the electricity generation sector. While the distribution of proceeds from oil

exploration (PD 87, as amended by PD 910), coal production (PD 972) and geothermal energy

(PD 1442), are still governed by the LGC37, mini-hydroelectric power is not. Under RA 7156 or

the “Mini-Hydroelectric Power Incentive Act”, a Special Privilege Tax is collected in lieu of the

incentives granted by the law (Sec.10.1), the allocation of which will observe the following rules:

a) if the mini-hydroelectric power development is located in a city, sixty percent (60%) of the

taxes shall accrue to the city and forty percent (40%) to the national government; b) if the mini-

hydroelectric power development is located in a municipality, thirty percent (30%) of the taxes

shall accrue to the municipality, thirty percent (30%) goes to the province and forty percent (40%)

to the national government.

A question was raised as to RA 9513 or the Renewable Energy (RE) Act. The law, and even its

IRR, were silent as to the shares of LGUs. Sec. 31 of the law touches on the expenditure aspect of

the proceeds, but not on the sharing part. It says, “Eighty percent (80%) of the share from royalty

and/or government share of RE host communities/LGUs from RE projects and activities shall be

used directly to subsidize the electricity consumption of end users in the RE host communities/

LGUs whose monthly consumption do not exceed one hundred (100) kwh. The subsidy may

be in the form of rebates, refunds and/or any other forms as may be determined by DOE,

DOF and ERC, in coordination with NREB”. Its IRR does not help either. It merely states that

“excess funds, after serving the end users referred to in the preceding paragraph, shall be used to

subsidize the electricity consumption of consumers of the same class in the host city, municipality

37 but see discussions on Malampaya, infra


or the province as the case may be”. Fortunately, revenues from renewable energy projects were

subsumed under proceeds from the utilization of national wealth in the General Appropriation

Acts (GAAs) that were passed by Congress, albeit this treatment rests on the construction that it

is the LGC- a general law- that governs this subsector.

Surprisingly though, the treatment afforded to revenues from RA 9513 was not extended to the

treatment of fishery charges under Sec.6 of RA 8550. Remember that under the Constitution,

the LGC, and more explicity, the IRR of the LGC, fishery and aquatic resources are part of the

national wealth. Note further that “proceeds” from the utilization of the national wealth specifically

include forestry and fishery charges (Art. 387, see note 17). Notwithstanding this legal support, the

Budget of Expenditures and Sources of Financing (BESF) does not in any way indicate that the

charges collected by BFAR are shared to the LGUs. The amendment introduced by RA 10654 did

not help either. On an almost similar boat is the treatment of forestry charges, the LGU shares

from which are limited to timber harvested from natural forests.38

Tax Jungle

Under the existing legal structure, both the national and local governments can impose taxes and

fees. And other than taxes, companies that are involved in the utilization of national wealth also

pay fees and charges imposed by both the national and local governments. In mining for instance,

the main mandate for the imposition of these taxes comes from the NIRC and the Mining Act, for

the former, and the LGC for the latter. For easy comparison, please refer to Table 2.

Mining companies may also pay fringe benefit taxes, deficiency taxes, privilege tax and improperly

accumulated earnings tax, as well as administrative fees imposed by the DENR, the Bureau of

Internal Revenue (BIR) and the Bureau of Customs (BOC). As to fees imposed by the DENR,

the Mines and Geosciences Bureau collects fees and charges in relation to the issuance of mining

rights and permits, and the conduct of mineral analysis and evaluation. These fees, pursuant

to the regulatory mandate of the agency are broken down into eight (8) categories: on mining

rights; geological/mining investigation and verification and other related services; lease of drilling

equipment and accessories; petrological, mineralogical, geochronological and other related

38 PPEI, citing a USAID study on Philippine Forest and Wildlife Law


table 2suMMary oF taxes aNd Fees iMposed oN the MiNiNg sector

by NatioNal aNd local goverNMeNts

1

By the National Government

By the Local Government

Excise Tax on Mineral Products (Sec. 151, NIRC)

Local Business tax (Sec. 143, LGC)

Royalty Payments to Indigenous Cultural Communities (Sec. 17, Mining Act)

Real Property Tax -Basic and for Special Education Fund (Sec. 235, LGC)

Royalty from Operations in Mineral Reservations (Mining Act)

Community Tax (Sec. 156)

Corporate Income Tax (Sec. 37, NIRC) Occupation Fees (Sec. 86, RA 7942)

Value-Added Tax on Imported Good and Services (sec. 107, NIRC)

Registration and Permit Fees (Sec. 153)

Withholding Tax- Foreign Shareholder Dividends (Sec. 25, NIRC)

Withholding Tax on Interest Payments on Foreign Loans (Sec. 25.B.5)

Withholding Tax- Royalties to Claim Owners (Sec. 5, RA 7942)

Documentary Stamp Tax (Title 7, NIRC) Capital Gains Tax (Sec. 27 (D)(2),(5)) Customs Duties and Fees (Tariff and Customs Code)

services; metallurgical tests, fire assay and chemical analysis; marine geophysical and geological

investigation and verification; payment for MGB forms; and payments for MGB publications.39

On a similar note, the DOE collects fees and charges pursuant to its own schedule, in compliance

with EO 197 and DBM-DOF Joint Circular No. 2000-2. It imposes exploration permits, contracts,

reports, data, maps and services on petroleum resources and development; registration licenses,

permits, maps, reports, data on geothermal and coal resources development; reproduction of

legal documents, service contracts, maps, seismic reports and other authorized official documents

including certification of copy or non-availability of records; efficiency testing, energy audit

and equipment rentals; processing fee for alternative fuels licensing, certificate of authority to

import and import extension for natural gas vehicle program and the certificate of accreditation;

renewable energy contract, permit, applications and stickers; fees for the issuance of certification,

39 PPEI, p. 35


acknowledgement notices/engagements/importation and exportation of downstream oil industry

players including additives registration; fees on the issuance of certificate of endorsements to

the Energy Regulatory Commission (ERC) for generating company and new generating facility;

various legal fees and energy research, testing and laboratory service fees for coal, geological,

petroleum, geothermal, and processed fuels including gasoline and diesel products.40

Aside from excise taxes and the royalty taxes on operations within mineral reservations and to

the indigenous cultural communities, the other taxes that are imposed on mining companies are

also levied on other taxpayers, based on the taxation principle of neutrality, albeit, it is the State

that owns these resources.41 Note that the items enumerated in Table 2, along with the taxes

applicable upon the effectivity of a Financial and Technical Assistance Agreement (FTAA) on

mining, constitute the basic government share that the national government receives.42

However, these taxes are treated differently. Excise taxes on mineral products43 form part of the

“proceeds from the utilization of national wealth” under Sec. 289 of the LGC, as implemented

40 PPEI, p.3541 See Magno, Cielo. The Mining for Development Framework for the Philippines. UP School of Economics. October 2015. 42 DENR DAO 2007-1243 SEC. 151. Mineral Products. -(A) Rates of Tax. - There shall be levied, assessed and collected on minerals, mineral products and quarry resources, excise tax as follows:(1) On coal and coke, a tax of Ten pesos (P10.00) per metric ton;(2) On all nonmetallic minerals and quarry resources, a tax of two percent (2%) 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.Notwithstanding the provision of paragraph (4) of Subsection (A) of this Section, locally extracted natural gas and liquefied natural gas shall not be subject to the excise tax imposed herein.(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;(a) Copper and other metallic minerals;(i) On the first three (3) years upon the effectivity of Republic Act No. 7729, one percent (1%);(ii) On the fourth and the fifth years, one and a half percent (1 1/2%); and(iii) On the sixth year and thereafter, two percent (2%);(b) Gold and chromite, two percent (2%).(4) On indigenous petroleum, a tax of three percent (3%) of the fair international market price thereof, on the first taxable sale, barter, exchange or such similar transaction, such tax to be paid by the buyer or purchaser before removal from the place of production. The phrase ‘first taxable sale, barter, exchange or similar transaction’ means the transfer of indigenous petroleum in its original state to a first taxable transferee. The fair international market price shall be determined in consultation with an appropriate government agency;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.


by Art. 387 of its IRR. On the other hand, the remaining taxes form part of national taxes44 that

may compose the IRA.

Likewise, as reflected in Table 2, mining companies pay real property taxes, sand and gravel taxes or

extraction fees, local business taxes, community taxes, occupation fees, wharfage fees, registration

and permit fees to LGUs. These are not part of the proceeds from the utilization of national

wealth.45 In 2014, mining companies, paid P320.78 million to LGUs in the form of taxes.46

This battery of taxes and fees create what is called a “tax jungle” or the situation where taxes

abound like trees in a dense forest, and which leave taxpayers- such as mining companies in this

case- suffocated, with no way out. What makes our taxation regime more suffocating is the presence

of two taxing authorities- national and local. And with the former, there are various authorities

that impose and collect the taxes and/or fees.

(B) For purposes of this Section, the term -(1) ‘Gross output’ shall be interpreted as the actual market value of minerals or mineral products or of bullion from each mine or mineral land operated as a separate entity, without any deduction from mining, milling, refining (including all expenses incurred to prepare the said minerals or mineral products in a marketable state), as well as transporting, handling, marketing or any other expenses: Provided, That if the minerals or mineral products are sold or consigned abroad by the lessee or owner of the mine under C.I.F. terms, the actual cost of ocean freight and insurance shall be deducted: provided, however, That in the case of mineral concentrate, not traded in commodity exchanges in the Philippines or abroad, such as copper concentrate, the actual market value shall be the world price quotations of the refined mineral products content thereof prevailing in the said commodity exchanges, after deducting the smelting, refining and other charges incurred in the process of converting the mineral concentrates into refined metal traded in those commodity exchanges.(2) ‘Minerals’ shall mean all naturally occurring inorganic substances (found in nature) whether in solid, liquid, gaseous or any intermediate state.(3) ‘Mineral products’ shall mean things produced and prepared in a marketable state by simple treatment processes such as washing or drying, but without undergoing any chemical change or process or manufacturing by the lessee, concessionaire or owner of mineral lands.(4) ‘Quarry resources’ shall mean any common stone or other common mineral substances as the Director of the Bureau of Mines and Geo-Sciences may declare to be quarry resources such as, but not restricted to, marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate: Provided, That they contain no metal or other valuable minerals in economically workable quantities.44 SEC. 21. Sources of Revenue. - The following taxes, fees and charges are deemed to be national internal revenue taxes:(a) Income tax; (b) Estate and donor’s taxes; (c) Value-added tax; (d) Other percentage taxes; (e) Excise taxes; (f) Documentary stamp taxes; and (g) Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue.45 Art. 387, IRR, LGC 46 PH-EITI Report (2014), p.69


In relation to this, industry players have often contended that the tax regime is confiscatory, and

is “nearing the point of prohibition.”47 Some observe that the number of fees and taxes has been

rising, and the industry is overtaxed and overregulated.48 On the other side of the fence are groups

from civil society and even the government that say that the taxes, royalties and fees are too low.49

MaNageMeNt oF proceeds

There are also concerns as to how the monies on the utilization of the national wealth are managed.

But first, it is best to look at how much is the total revenue derived from the mining industry by

the national government.

table 3taxes aNd Fees paid to the NatioNal goverNMeNt50

by MiNiNg coMpaNies, 2010-2014

Source: PPEI/MGB*P500; **P1,000;***2,500; ****5,500; *****6,000

1

Taxes/Fees

Collections (In Million Pesos)

2010 2011 2012 2013 2014

Excise Tax 493.56 1,535.98 1,417.53 1,315.44

1,848.91

Royalty Payments 252.55 2,002.99 1,538.85 1,103.90 2,259.06 Corporate Income Tax 2,740.00 4,487.54 3,738.83 4,386.97 9,449.15

Value-Added Tax (VAT) 1,675.21 2,746.59 4,526.97 7,223.27 6,854.26 Documentary Stamp Tax 24.02 71.47 85.79 138.80 119.09 Capital Gain Tax 12.49 3.01 22.99 26.95 17.96 Customs Duties/Fees 210.02 350.96 347.41 536.00 401.32 Other National Taxes Fringe Benefits Tax 2.11 2.08 21.14 21.12 35.45 Privilege Tax 2.04 1.02 1.30 Deficiency Tax 17.77 16.81 2.27 12.36 18.40 Fees Filing Fees - 3.24 8.01 5.88 5.10 VAT Registration Fees - 0.00** Registration Fees 3.42 0.00**** 0.67 1.90 Annual Registration Fee 1.09 0.00* 0.00*** 0.00*** 0.00**** EVAT Registration 0.00* 0.00* Rental Fees 0.51 1.44 0.03 Others 0.99 1,827.48 1,259.59 148.47 536.25 TOTAL

5,429.81

13,053.61

12,970.91

14,921.27

21,548.18

Growth Rate (%) Year-on-year

140.41 -0.01 15.04 44.41

50 For consistency purposes, data used here are from MGB, not from PH-EITI Reports. Also, MGB uses an entry called “compensating tax”, which is no longer imposed. The explanation given is not sufficient so the numbers for this entry (P81.70M in 2011; 24.97 in 2012; 2.25 in 2013 and 64.82 in 2014) were lumped with “others.”

47 PH-EITI Report f(FY 2014), p. 6748http://www.bworldonline.com/content.php?section=Opinion&title=taxation-and-regulations-in-philippine-mining-industry&id=115703, last accessed February 28, 201749 PH-EITI Report, loc. cit.


It must be noted that revenues have been improving since 2013. In fact, minus the slight dip in

2012, taxes and charges paid by mining companies to the national government have increased for

the period 2010-2014. For this period, revenues from mining have risen by an average of 49.96%,

although much of this is brought about by the 140.41% uptick for 2011-2012. (How revenues

from the sector fare as to the whole economy is discussed in the latter part of this paper).

And as to allocation, the LGC is silent on how the national government should utilize the proceeds

from the utilization of national wealth, a practice that is unparalleled in most countries which

adopted earmarking, such as Brazil, Mexico and Nigeria.51 The only law that set a purpose on how

a revenue stream shall be utilized was PD 910 which created the Energy Development Board. The

decree also allowed the use of funds “to finance energy resource development and exploitation

programs and projects of the government and for such other purposes” (underscoring supplied)

that the President may direct. In Belgica vs. Ochoa, the Supreme Court held that the phrase “such

other purposes” is invalid for being an insufficient standard.52

On the other hand, LGC mandates how monies should be used by LGUs. Section 294 says that

they shall be “appropriated to finance local development projects”. There is no definition under

the law on what constitutes development and livelihood projects, nor is that broad term explained

by the IRR. A problem with this provision is the limitation that it imposes on LGUs on how to

utilize these proceeds from the exploitation of resources in their very own respective backyards.

This is hardly consistent with decentralization and local autonomy where LGUs are assumed to be

in the best position to determine and respond to the needs of their constituents.

Moreover, the funds that are transferred to the LGUs are not disaggregated in the sense that

LGUs do not know how much of the monies they receive are from the utilization of national

wealth. Certainly, this non-disaggregation makes it difficult to track how such monies are spent

by LGUs.53 This is not only an issue about allocation standards but also about accountability and

transparency.

However, Sec. 294 contains a proviso that applies exclusively to “proceeds derived from the

development and utilization of hydrothermal, geothermal, and other sources of energy” which

51 Morgandi, Matteo. Extractive Industries Revenues Distribution at the Sub-National Level. Revenue Watch (2008)52 G.R.No. 208556 (2013)53 Magno, op.cit


“shall be applied solely to lower the cost of electricity in the local government unit where such

a source of energy is located”. Again, this is a provision that infringes on local autonomy as it

dictates how a revenue stream must be spent by units which are supposed to be more familiar with

their conditions.

distributioN oF proceeds

It is the distribution -or lack of or delay of distribution- of proceeds, however, that has been most

controversial.

One such controversy involved the Camago-Malampaya natural gas reservoir, and the project

which is considered to be the “largest single investment in the country” that is “projected to

generate approximately US$8-10 billion” for the Philippine government.54 The Province of

Palawan, along with Bishop Pedro Arigo, Misters Cesar Sarino, Jose Socrates and then Prof. Harry

Roque, Jr.. went to the Supreme Court to assert the Provincial Government’s claim over a forty

(40%) share of the proceeds from the project. The main contention is that “the gas fields are

located within the province of Palawan and is thus entitled to the proceeds as provided for in

the Local Government Code”55. International law principles were also used by the petitioners to

prove their point. They also questioned the validity of EO 683,56 the Section 3 of which states

that, “[t]he National government, with due regard to the pending judicial dispute, shall allow the

Province of Palawan, the Congressional Districts of Palawan and the City of Puerto Princesa to

securitize their respective shares in the 50% of the disputed 40% of the Net Government Share

in the proceeds of SC 38 pursuant to the PIA [Provisional Implementation Agreement]”. The

public respondents argued that the Malampaya funds are not the gross collections derived from

the utilization of national wealth under Sec. 290 of the LGC, as implemented by Art. 387 of the

IRR, but from the “net proceeds” generated from the operations of the project and are given to

Palawan as “financial assistance” by virtue of Sec. 25 (c) of the LGC.57 Thus, they claimed that

54 Petition by Bishop Arigo, et al vs. Executive Secretary. G.R. No. 18594155 Ibid. See Sec. 3 (1) of RA 7611, otherwise known as “Strategic Environmental Plan (SEP) for Palawan Act” that says that Palawan “refers to the Philippine province composed of islands and islets located 7°47’ and 12°’22’ north latitude and 117°’00’ and 119°’51’ east longitude, generally bounded by the South China Sea to the northwest and by the Sulu Sea to the east.56 Authorizing the use of fees, revenues and receipts from service contract no. 38 for the implementation of development projects for the people of palawan57 Memorandum by Public Respondents on Arigo vs. Executive Secretary. p. 23.


the release of the funds under EO 683 is valid. This case is still pending before the Supreme Court

but what is important to remember is that the controversy shows that issues on natural resources

overlap with other facets such as territorial boundaries.

Parenthetically, note that Sec. 290 of the LGC uses “gross collections” as the base for the

computation of the LGU share in national wealth. Despite this, Sec. 5 of RA 7942 contained a

provision that allotted ten percent (10%) of the collections from mineral reservations for “special

projects and other administrative expenses related to the exploration and development of other

mineral reservations” that shall accrue to the MGB. While this is completely valid (a special

law trumps a general law) it negates the sense of the LGC on the treatment of revenues from

exploitation of natural resources, nonetheless.

Concerns about the release of proceeds also abound. Firstly, shares are included in the annual

General Appropriations Act (GAA) as part of the Allocations to LGUs (ALGU). This procedure

is questioned as contrary to the provisions of Sec. 293, in relation to Sec. 286 of the LGC. Note

that under RA 9358 or the Supplemental Budget Act of 2006, IRA shares are now automatically

appropriated. Thus, it is argued, the same treatment shall be extended to shares from national

wealth.58

58 PPEI, pp. 6-7 59 Includes RA 9513

table 4lgu shares iN the utilizatioN oF NatioNal wealth59

2009-2017

Source of basic data: BESF, DBM

1

Year

Amount (In Million Pesos)

Appropriated Obligated

2009 607.05 538.96

2010

1,254.56 704.80

2011 1,513.66 933.92

2012 2,455.27 2,170.76

2013 2,343.68 2,022.31

2014 2,437.48 1,723.67

2015 3,043.53 4,280.29

2016 5,923.57 5,293.57

2017 4,054.28


How much were appropriated and obligated through the years? Table 4 shows the amounts for

nine (9) years, that is from FYs 2009-2017. As to shares which were downloaded to specific LGUs,

please refer to Annex 1.

Secondly, as mentioned earlier, the transfers to the LGUs are not disaggregated. As a result, LGUs

place all their revenues to the general funds that are then appropriated to finance all types of

projects, contrary to LGC provision that requires financing of development projects.60 Non-

disaggregation has an effect on transparency as tracking of expenditures becomes more difficult.

Thirdly, concerns have also been raised about the timeliness and speed of the release. Several

LGUs have complained about non-release or delay in the release of the proceeds. Siquijor and

Mac Arthur, Leyte have both claimed that the funds have not been transferred to them, with the

former saying that it has not received any transfer for the last twenty (20) years. On the other

hand, Cantilan in Surigao del Sur, Palawan and Guian, Eastern Samar have alleged that they have

experienced delays in the receipt of funds.61 Suggestions were even floated to delete the phrase

“from the preceding fiscal year” under Sec. 290 and “based on the preceding fiscal year” in Sec.

291 to expedite the release. Nonetheless, the Departments of Finance (DOF) and Budget and

Management issued Joint Circular 2016-1 that allows the Bureau of Treasury to release the IRA

and other LGU shares through authorized government banks, a move that departs from the

practice of releasing the same to DBM Regional Offices that required further certifications from

different agencies.62

The aforementioned issues show the regular interplay of the powers of the national government

and the local governments. The persistent inconsistencies in national policies especially on their

treatment of local autonomy show that decentralization is not enough. Indeed, while it is true that

LGUs have obtained greater powers through the LGC, the unitary set-up has proved to be limiting

in many respects.

60 PH-EITI Report (FY 2014), p. 8561 http://www.bworldonline.com/content.php?section=Economy&title=local-gov&8217ts-struggle-to-collect-share-of-oil-gas-mining-taxes&id=124433, last accessed January 19, 2017 62 PH-EITI (FY 2014), p. 10


Natural resources MaNageMeNt iN a Federal set-up

A design of the federal infrastructure on natural resources management should consider three

basic questions. First: who should own the natural resources? Second: Who will manage the natural

resources? Third: How will revenues be treated? Each issue assumes several considerations which

will be tackled here in seriatim.

Ownership of Natural Resources

Fundamental to the discussion is ownership. Who should own natural resources?

That question hinges on a related query which is: should there be constitutional placement for

the treatment of natural resources? Major considerations on this regard include the need for an

overarching policy. That overall policy must also be clear for purposes of stability and predictability.

Stability is necessary for the domestic front as natural resources management is an issue that has

interfaces with other governance facets including security. For instance, in the late 1980s up to the

1990s, the Bougainville Island in Papua New Guinea demanded greater autonomy that resulted in

a conflict. What triggered the conflict was the national government’s decision to operate a large

open-pit mine in the island despite local opposition. Predictability, on the other hand, is essential for

both local and international stakeholders such as investors. Ambiguity can pose as a major source

of struggle for domestic actors, especially between national and subnational governments. It can

also ferment political risk for potential investors who calculate their return on investment vis-à-vis

the government’s or other actors’ share. Lack of clarity, therefore, can discourage business, and

thus, hamper the flow of capital. The experience of Angola- one of the world’s major diamond

producers- should teach us lessons. According to the World Bank, the country, which has a weak

legal and regulatory framework particularly on ownership rights, is considered by investors as high-

risk to the point that they are discouraged from investing in the country.63

Another related question is the scope of natural resources. While it is not necessary that the term

must be defined, it is important to consider the breadth of natural resources that will be covered

63 Haysom, Nicholas and Kane, Sean. Briefing Paper. Negotiating natural resources for peace: ownership, control and wealth-sharing. Centre for Humanitarian Dialogue. October 2009. Citing World Bank (2006) Angola. Economic Memorandum: Oil, Broad-based Growth, and Equity 2 October


by any arrangement. In some jurisdictions, a statement on the scope matters because some natural

resources are owned by the federal government while some are owned by subnational entities. In

India, for instance, offshore resources are federal while onshore resources belong to the states.

The federal government owns offshore resources because they may traverse maritime boundaries

of states which are harder to define. This treatment may be good reference on a future policy on

areas such as Malampaya.

How do federal governments settle the issue of ownership? Some countries adopted a policy of

ownership by subnational governments which then determines legislation on this regard. To this

type belong older generations such as Canada, USA and Australia. Note that the last two countries

were once composed of states that banded together to form a federal country and there was yet no

knowledge of either the presence or significance of natural resources such as oil.64 On the other

hand, younger federations have treated natural resources as national patrimony for the benefit of

the nation. There is sound economic basis for this treatment: the significance of resources such

as oil and gas for the national economies. However, such set-ups have not settled demands from

subnational governments, so some federations have opted for shared arrangements or what one

study aptly described as “more nuanced treatment of resource ownership” that accommodated

regional aspirations or interests.65

The following table shows the different arrangements:

table 5owNership oF Natural resources

64 Haysom and Kane, op cit. 65 Id.

1

Federal

Subnational Mix/Shared Not designated

Nigeria –The entire property in and control of all minerals, mineral oil and natural gas in, under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation

Canada- All Lands, Mines, Minerals, and Royalties belonging to the several provinces of Canada, Nova Scotia, and New Brunswick at the Union and all Sums then due or payable for such Lands, Mines, Minerals, or Royalties, shall belong to the several Provinces of Ontario, Quebec, Nova Scotia, and New Brunswick in which the same are situate or may arise, subject to any Trusts existing in respect thereof, to any Interest other than that of the Province in the same

Russia- The land and other natural resources shall be used and protected in the Russian Federation, as the basis of the life and activity of the people living on their respective territories. The land and other natural resources may be in private, state, municipal and other forms of ownership.

Sudan – Without prejudice to the position of the parties with respect to the ownership of land and subterranean natural resources, including in Southern Sudan, this Agreement is not intended to address the ownership of these resources.


1

Federal






1

Federal






1

United Arab Emirates (UAE) - The natural resources and wealth in each Emirate shall be considered to be the public property of that Emirate

Iraq- Oil and gas arte owned by all the people of Iraq in the regions and governorates

Venezuela – The mining deposits and of hydrocarbons…existing in the national territory, under the bed of the territorial sea, in the exclusive economic zone and the continental platform belong to the Republic, are goods of the public dominion and therefore, inalienable and imprescriptible.

India- All lands, minerals and other things of value underlying the ocean within the territorial waters, or the continental shelf, or the exclusive economic zone, of India shall vest in the Union and be held for the purposes of the Union (offshore) Land, water, forests and mineral resources- to the States (see Seventh Schedule of the Constitution)

Brazil- Mineral deposits, under exploitation or not, and other mineral resources and the hydraulic energy potentials form, for the purpose of exploitation or use, a property separate from that of the soil and belong to the Union, the concessionaire being guaranteed the ownership of the mined product.


1

Federal






Source of basic data: Haysom and Keane, Constitutions of the countries mentioned

1

Brazil- Mineral deposits, under exploitation or not, and other mineral resources and the hydraulic energy potentials form, for the purpose of exploitation or use, a property separate from that of the soil and belong to the Union, the concessionaire being guaranteed the ownership of the mined product.

Indonesia (not federal) – Sectors of production which are important for the country and affect the life of the people shall be under the powers of the State. The land, the waters, and the natural resources within shall be under the powers of the State and shall be used to the greatest benefit of the people.

Papua New Guinea- The sovereignty of Papua New Guinea over its territory, and over the natural resources of its territory, is and shall remain absolute. (The ownership of natural resources in Bougainville shall be determined in the future.


Control

Control is a necessary attribute of ownership but also separable from ownership. In the context of

natural resources management, while ownership may be vested in one entity, that entity may not

necessarily be the one using or managing the resource. A more important consideration, therefore,

in the discussions on the matter is who gets to use and control the natural resources in the country.

Foremost aspect of the issue is who gets to decide on the matter. Essentially, this means which

branches of government would be involved and to what extent in management of natural resources.

The laws on the subject, for instance, may be vested in the federal Congress, or in state Congresses.

This hinges on an even more specific concern: the balance between a state’s regulatory power and

the need for consistency on a national level through the federal government’s police power. Also,

what should be the powers of the President, and his alter egos? Should there be one national

agency that would oversee the management of resources? And should this agency be imbued

with quasi-legislative and quasi-judicial powers? Finally, which body should settle conflicts? Which

issues may be settled by a Federal Supreme Court and/or the subnational judiciary? In South

Africa, a strong legal system is in place and courts are asked to “apply a logical test to determine

which level of government should control what function”66. It is noted that under our present set-

up, the Supreme Court wields much power and through its power of judicial review, may decide on

cases that involve even the exercise of discretion. In one case, the Philippine Supreme Court has

halted mining in the Zamboanga Peninsula through the issuance of Writ of Kalikasan.67

Certainly, the distribution of powers and functions is a complicated, multi-faceted issue, the

objectives of which may be dissimilar to goals of ownership. These purposes reflect balancing of

interests, from competing national and subnational persuasions, to management concerns such

as competence and accountability. Ultimately, a design of the system must consider the following

criteria:68

a. Efficiency and Capacity. Which level of government has the capacity to manage natural

resources efficiently?

66 Haysom and Kane, op cit. p. 1667 Philippine Justice Earth Center, Inc. vs. Secretary, GR No. 197754 (2011)68 See Haysom, p. 15


b. Equity. How will revenues be treated?

c. Accountability. Which level of government provides the greatest accountability to the

people with regard to the utilization of natural resources?

d. National Interest. What are the national objectives? How should different kinds of natural

resources be treated? Should there be different treatment on some natural resources?

e. Subnational Interest. What are the priorities of the subnational governments that should

be incorporated in the set-up? Should all subnational governments be treated similarly?

For reference, the next table shows the Constitutional allocation of control in selected countries.

Note that in some jurisdictions, allocation of authority is not placed in their fundamental laws, but

in detailed legislations. An example of this is the United States, where states own natural resources

(except petro-rich federal lands)69 and formulate laws on their management.

table 6 allocatioN oF authority over Natural resources

1

Federal Subnational Shared Asymmetrical Nigeria- National Parliament has exclusive authority over mines and minerals, including hydrocarbons

Canada- Provincial legislatures and governments are given exclusive authority to make laws related to exploration for non-renewable natural resources; development, conservation and management of non-renewable and forestry resources

Iraq- The federal government, together with its producing regional and provincial governments, are given the responsibility to formulate strategic policies to develop oil and gas wealth to achieve the highest benefit for the people

Indonesia (not federal) – Council of Representatives of the Regions (Upper House of Parliament) given exclusive responsibility for legislation related to the management of natural resources and other economic resources. Law on the Government of Aceh provides for joint management of oil and gas resources between Government of Indonesia and the Provincial Government of Aceh

Venezuela – National Public Power (Federal Government) has responsibility for the governance and management of mines and hydrocarbons

United Arab Emirates- Each emirate has full control over its natural resources and other wealth

Russia- Joint jurisdiction of the Russian Federation over use and management of land, mineral resources, water resources, and other natural resources as well as protection of the environment

Papua New Guinea (not federal)- Natural resources included in the National Legislative Power. Natural resources and land included in powers and functions to be transferred to the Bougainville Autonomous Government when it feels it has the need and capacities.

69 See Anderson, George, Fiscal Federalism: A Comparative Introduction (2010)


Source of basic data: Hayson and Kane; Constitutions of the different countries

1





Brazil – The Union has monopoly on prospecting and exploitation of deposits of petroleum and natural gas or other fluid hydrocarbons and on prospecting, mining, enrichment, reprocessing, industrialization, and trading of nuclear mineral ores and minerals and their by-products with the exception of radioisotopes

India – Federal: Regulation and development of oilfields and mineral oil resources; petroleum and petroleum products; regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest. State: Water and fisheries

Germany- The transfer of land, natural resources, and means of production to public ownership or other forms of public enterprises

1

Federal Subnational Shared Asymmetrical Nigeria- National Parliament has exclusive authority over mines and minerals, including hydrocarbons

Canada- Provincial legislatures and governments are given exclusive authority to make laws related to exploration for non-renewable natural resources; development, conservation and management of non-renewable and forestry resources

Iraq- The federal government, together with its producing regional and provincial governments, are given the responsibility to formulate strategic policies to develop oil and gas wealth to achieve the highest benefit for the people

Indonesia (not federal) – Council of Representatives of the Regions (Upper House of Parliament) given exclusive responsibility for legislation related to the management of natural resources and other economic resources. Law on the Government of Aceh provides for joint management of oil and gas resources between Government of Indonesia and the Provincial Government of Aceh





Some federations with power-sharing arrangements employed different approaches. In South

Africa and Sudan, there were divisions of responsibilities, i.e. exploration and production aspects

were left to the provinces, while transportation, refining, marketing and exporting were awarded


to the national government. In Germany, the authority to come up with a coordinated natural

resources strategy was left to a body made up of representatives from both the federal and

subnational governments. Others opted for an intergovernmental commission such as Sudan’s

National Petroleum Commission. Other jurisdictions split the legislation and implementation

aspects, with the former given to the national parliament and the latter to the local governments.70

It must be noted that the Philippines has an experience with an asymmetrical set-up. Under the

Constitution, the organic act of autonomous regions shall provide for legislative powers over

natural resources.71 Pursuant to this mandate, Sec. 5 (a) of RA 9054 on the Autonomous Region in

Muslim Mindanao (ARMM)72 provides that, “[t[he control and supervision over the exploration,

utilization, development, and protection of the mines and minerals and other natural resources

within the autonomous region are hereby vested in the Regional Government in accordance with

the Constitution and the pertinent provisions of this Organic Act except for the strategic minerals

such as uranium, petroleum, and other fossil fuels, mineral oils, all sources of potential energy,

as well as national reserves and aquatic parks, forest and watershed reservations already delimited

by authority of the central government or national government and those that may be defined by

an Act of Congress within one (1) year from the effectivity of this Organic Act. As to strategic

minerals, the same law states that, “[f]ifty percent (50%) of the revenues, taxes, or fees derived from

the use and development of the strategic minerals shall accrue and be remitted to the Regional

Government within thirty (30) days from the end of every quarter of every year. The other fifty

percent (50%) shall accrue to the central government or national government”. Note that this

provision is different from the LGC section on utilization of national wealth.

Other dimensions of the control aspect include protection of the rights of Indigenous Peoples,

and issues such as contracting authority, environmental standards, labor laws, procedures, and

fiscal regime.

As to fiscal regime, there are studies suggesting that when it comes to taxation of natural resources,

it is best to have harmonized tax laws within the federation. This is more efficient because it avoids

70 Haysom and Kane, p. 1871 Sec.20 (3), Article X, 1987 Constitution72 An act to strengthen and expand the organic act for the autonomous region in Muslim Mindanao, amending for the purpose Republic Act no. 6734, Entitled “An act providing for the Autonomous Region in Muslim Mindanao,” as amended


a competition among subnational governments, the so-called “race to the bottom” where each

unit offers more attractive packages- tax and incentives- so that investors would prefer it over

the others. This would mean that there would be centralized decision-making and harmonized

key taxes, even as to the bases and rates. It is noted that even in the USA, federal legislation is

the primary source of taxation law through the federal interstate commerce power. Nevertheless,

some federations left taxing power to constituent units, or shared it with them. Please refer to the

following table to compare the provisions in their respective fundamental laws.

table 7power oF taxatioN oN Natural resources

Source: Haysom and Kane

1

Country

Constitutional Provision

Canada Provinces have the exclusive right to levy a range of taxes and royalties on earning from natural resources. Federal government is able to levy corporate income taxes.

Iraq Constitution does not specify a power of taxation, but provides that non-enumerated authorities revert to regions and provinces. Local governments could therefore theoretically tax oil and gas operations.

India States may impose taxes on mineral rights subject to any limitations imposed by Parliament by law relating to mineral development

Russia Russian Federations and states jointly establish common principles of taxation with these to be regulated by federal law. In practice, states are able to levy corporate profit taxes on oil and gas companies.

Sudan National government is able to levy business-profit taxes and states are able to levy land-property taxes, royalties and excise taxes. (Under the Comprehensive Peace Agreement)

Papua New Guinea (non-federal)

National Government will support Bougainville in the goal of becoming financially self-reliant; once this occurs the two governments will establish a revenue-sharing formula.

Collection, however, is a different matter, because this is more of an administrative factor. In

Australia, Malaysia and Russia, the collection is made by the federal government. In Germany and

Switzerland, the subnational governments- the landers and cantons, respectively, serve as collecting

agencies. In the USA, India and Spain (except Basque and Navarre), the power is shared among

the two levels of government.73 In Canada and Sudan, it depends on the revenue stream.74

73 Anderson, op. cit. 74 Haysom and Kane, p.23


Treatment of Revenues

The last consideration on management is how the revenues will be handled. A preliminary

consideration, however, should not be forgotten. Sharing of proceeds from the exploitation of

natural resources may track the provisions on ownership and to a large extent, control. As a

general principle, who owns and controls the resources must be able to use the fruits thereof.

Nonetheless, this is a distinguishable and discrete fragment of management and this is because the

sharing of revenues may have different objectives than the other facets.75 Political concern such as

equity and peace (like in the case of ARMM) are dissimilar, although related, to matters of capacity

and accountability that are considerations for determination of control.

What is settled though, is that in many federations, their Constitutions address the issue. This is

particularly important in jurisdictions where resource dependence is a trigger for conflicts76 so it

is essential to have clear and specific rules governing the revenues. This is especially true when the

natural resources sector plays a dominant role in the economy,77 such as in Nigeria, Russia and.

Venezuela. It is noted that while our Constitution provides general statements on wealth-sharing,

it also left to the determination of Congress the precise arrangement (which is now contained in

the LGC).

To see the Philippine context, it is important to show the exploitation of natural resources-

particularly mining- as an economic sector. It is recognized that the Philippines contains a

significant amount of mineral reserves, estimated to be “US$1.4 trillion of gold, copper, nickel,

aluminium, and chromite which are distributed across around 9 million hectares of area with high

mineral potential”78 (See Figure 1). Table 8, on the other hand, shows the contribution of the sector

to the economy.

75 Id. 76 Id.77 Id.78 PH-EITI Report, p.50


table 8MiNiNg sector’s coNtributioN to the ecoNoMy, 2013-2014

Source of basic data: PH-EITI (2014)

1

Metals Sector

Year

Production Value (In

Million Pesos)

Gross Domestic

Product [GDP] (In Million

Pesos)

Share in GDP (%)

Labor Employed

(no.)

Total Employment

(no.)

Percentage to Total

Employment (%)

2013

98, 599

11, 542,286

0.85%

250,000

57,960,148

0.43%

2014

138, 610

12,642, 736

1.10%

239,000

56,771, 328

0.42%

Non-Metals Sector

2013

70, 312

11, 542, 286

0.61%

5,600

57,960,148

0.0097%

2014

78, 053

12,642,736

0.62%

3,600

56,771, 328

0.0063%

It can be readily seen that the sector’s contribution to the national income and to employment

is low, although experts realize that it has the potential to contribute to the economy. To what

extent the mining (metallic) sector contributes to the Gross Regional Domestic Product (GRDP)

is shown by Table 9.

table 9coNtributioN oF Metals MiNiNg to grdp, 2013-2014

1

Region

2013 2014 Total

Production of Selected

Metals (In Million

Pesos)

GRDP (In

Million Pesos)

% of

GDRP

Total Production

of Selected Metals (In Million Pesos)

GRDP (In

Million Pesos)

% of

GRDP

I

766.70

358,359.59

0.21

1,322.87

390,510.62

0.34

II

11,021.81

207,505.12

5.31

13,682.29

234,314.84

5.84

III

3,840.90

1,017,229.69

0.38

3,803.29

1,147,550.13

0.33

IVA

1,874,747.27

0.00

2,014,890.47

0.00

IVB

12,799.53

189,408.70

6.76

20,991,208.30

212,218.11

9.89

V

14,844.55

243,907.23

6.09

10,195.87

264,495.01

3.85

VI

459,866.85

0.00

502,800.28

0.00

VII

8,898.22

738,081.29

1.21

11,899.44

831,833.28

1.43

VIII

122.10

250,299.81

0.05

253.45

258,739.06

0.10

IX

2,540.92

235,559.22

1.08

51.98

257,060.40

0.02

X

436,392.22

0.00

485,705.08

0.00

XI

1,680.04

459,391.82

0.37

1,739.12

519,068.67

0.34

XII

320,522.90

0.00

351,356.59

0.00

CARAGA

29,516.86

133,580.58

22.10

62,351.61

155,296.01

40.15

CAR

12,567.24

217,799.12

5.77

12,318.80

230,705.79

5.34


Source of basic data: PH-EITI Report (2014)

1

Region

2013 2014 Total


Metals (In Million

Pesos)

GRDP (In

Million Pesos)

% of

GDRP

Total Production


GRDP (In

Million Pesos)

% of

GRDP

I

766.70

358,359.59

0.21

1,322.87

390,510.62

0.34

II

11,021.81

207,505.12

5.31

13,682.29

234,314.84

5.84

III

3,840.90

1,017,229.69

0.38

3,803.29

1,147,550.13

0.33

IVA

1,874,747.27

0.00

2,014,890.47

0.00

IVB

12,799.53

189,408.70

6.76

20,991,208.30

212,218.11

9.89

V

14,844.55

243,907.23

6.09

10,195.87

264,495.01

3.85

VI

459,866.85

0.00

502,800.28

0.00

VII

8,898.22

738,081.29

1.21

11,899.44

831,833.28

1.43

VIII

122.10

250,299.81

0.05

253.45

258,739.06

0.10

IX

2,540.92

235,559.22

1.08

51.98

257,060.40

0.02

X

436,392.22

0.00

485,705.08

0.00

XI

1,680.04

459,391.82

0.37

1,739.12

519,068.67

0.34

XII

320,522.90

0.00

351,356.59

0.00

CARAGA

29,516.86

133,580.58

22.10

62,351.61

155,296.01

40.15

CAR

12,567.24

217,799.12

5.77

12,318.80

230,705.79

5.34

1

Region

2013 2014 Total


Metals (In Million

Pesos)

GRDP (In

Million Pesos)

% of

GDRP

Total Production


GRDP (In

Million Pesos)

% of

GRDP

I

766.70

358,359.59

0.21

1,322.87

390,510.62

0.34

II

11,021.81

207,505.12

5.31

13,682.29

234,314.84

5.84

III

3,840.90

1,017,229.69

0.38

3,803.29

1,147,550.13

0.33

IVA

1,874,747.27

0.00

2,014,890.47

0.00

IVB

12,799.53

189,408.70

6.76

20,991,208.30

212,218.11

9.89

V

14,844.55

243,907.23

6.09

10,195.87

264,495.01

3.85

VI

459,866.85

0.00

502,800.28

0.00

VII

8,898.22

738,081.29

1.21

11,899.44

831,833.28

1.43

VIII

122.10

250,299.81

0.05

253.45

258,739.06

0.10

IX

2,540.92

235,559.22

1.08

51.98

257,060.40

0.02

X

436,392.22

0.00

485,705.08

0.00

XI

1,680.04

459,391.82

0.37

1,739.12

519,068.67

0.34

XII

320,522.90

0.00

351,356.59

0.00

CARAGA

29,516.86

133,580.58

22.10

62,351.61

155,296.01

40.15

CAR

12,567.24

217,799.12

5.77

12,318.80

230,705.79

5.34

The table shows the great variance in the contribution of the sector to regional economies. Note

that, for 2014 alone, the sector is a significant contributor (40.15%) in CARAGA’s economy, has a

major share (9.89%) in Region IVB (Mimaropa), but zero contribution in Regions IVA (Calabarzon),

VI (Western Visayas), X (Northern Mindanao) and XII (Socssksargen), and practically nil in IX

(Zamboanga Peninsula).

In designing the legal structure that will govern the treatment of revenues, the first that has to be

determined is the rule on sharing and transfers. Two principles must be considered in the design

of this system: derivation and equity. The first calls for a special treatment for the area where the

resource is derived. The extreme application of this principle means that the constituent unit where

the resource is located gets the whole pie. This follows the rule on ownership. Equity, on the other

hand, calls for broad sharing on the recognition that natural resources are not distributed evenly

among constituent units. At present, our Constitution looks at the latter as an overriding principle.


Figure 1Map oF areas with poteNtial MiNeral deposits

1

Source: PH-EITI Report (2014)

Thus, Sec.1, Art. XII states: “Section 1. The goals of the national economy are a more equitable

distribution of opportunities, income and wealth; a sustained increase in the amount of goods and

services produced by the nation, for the benefit of the people; and an expanding productivity as

the key to raising the quality of life for all, especially the underprivileged.” (underscoring supplied).


Note the primacy given to equitable distribution of wealth. It has to be stressed, though, that the

Constitution also gives attention to derivation, as manifested in Section 7, Article X. This is the

principle that governs the wealth-sharing provisions of the LGC. Our Constitution, therefore, is

a compromise of these two principles.

Several approaches are employed on sharing and transfers. The first approach is clear division

of powers among the levels of government. This means that different types of revenues will be

treated differently, such that some will go to the national government, while some will be left to

the subnational units. Levies such as corporate income taxes and export charges may be left to the

federal government, while royalties, excise and production taxes may be left to local governments,

as in Sudan.79 In countries like Australia, Canada and the United States, it is the subnational

governments that get the major share from the resources that are located within their boundaries

while the reverse is true for Malaysia, India and Argentina where the federal governments get

a bigger share of these resources. Even in countries where ownership of certain resources is

vested in the national government, the constituent units still get shares, as in Brazil.80 This system,

however, may result in a wide income gap between the resource-rich units and those that lack these

resources, as illustrated by the UAE where Dubai and Abu Dhabi are far more affluent than the

other emirates.81

The second approach is formula-based sharing that includes transfers of revenues among levels

of government, according to agreed criteria. This approach may take into account the principle of

equalization, which promotes horizontal redistribution. While federations that observe revenue-

sharing have incorporated derivation in their schemes, countries such as Nigeria, Bolivia and

Mexico redistribute proceeds to non-producing regions. On the other hand, Peru, Brazil and

Ghana do not.82 As to the criteria for redistribution, what are often used are population, land

mass, standard of public services, national expenditure needs, derivation and compensation for

the exploitation of resources.83 The often-cited example of this approach is the Nigerian system

which is flexible enough so that the Parliament is authorized to approve a formula based on several

of the aforementioned criteria every five years.84 However, domestic actors point out an inherent

79 Haysom and Kane, p.2380 Anderson, p. 1081 Haysom and Kane, p. 23 82 Morgandi, p.1183 Id. 84 Id.


disadvantage of this system: the administrative problems that go with collection and distribution.

The system has parallels in the Philippines, along with the problems that go with it. We have a

transfer scheme (which is likewise plagued by complaints), although we do not have equalization

arrangements with elaborate criteria, as the metrics of population and land area (under Sec. 292,

LGC) are only applicable when resources are located across different LGUs.

The third approach is a combination of these models. In Iraq, there is an allowance for regional-

led systems for future oil fields, while in Indonesia (which is unitary), an asymmetrical system is

employed with regard to Aceh.85

There is a further nuance to these treatments, and this is the use of a special purpose fund or

trust funds as the pool for revenues from utilization of natural resources, which will then be

used for definite purposes. These trust funds will be outside the national budget, and hence, will

not require legislation for appropriation. In Iraq, for instance, there is a proposal to create an

Intergovernmental Petroleum Revenue Fund.86 There is nothing new in this kind of arrangement,

as we have off-budget accounts, including trust receipts. This may be considered although there

are mixed reviews for this approach: while it can increase efficiency and provide more consistent

source of funds, it can also result in loss of expenditure control, distort allocation of monies and

circumvent spending priorities and lead to less flexibility in budget allocation.87

It is true that different countries employ unique systems, based on specific objectives and interests.

The robust structures, however, meet the standards of responsiveness and efficiency, stability and

predictability and transparency and accountability.

coNclusioN

The present structure on natural resources management in the Philippines reflects two dominant

characteristics: centralized yet fragmented.

85 Id. 86 Haysom and Kane, p. 34. 87 See IMF Guidelines for Public Expenditure Management, https://www.imf.org/external/pubs/ft/expend/, last accessed 16 March 2017


It is the national government that sets the overall policy, reflected no less in the Constitution.

The constitutional provision on ownership by the State shapes the policies which govern the

sector, including those on control and treatment of revenues. Indeed, policies on control and

treatment of proceeds from the exploitation of natural resources flow from state ownership. This

is illustrated for instance in the fact that it is national legislation that has primacy, and in how the

sharing scheme is tilted in favor of the central government. It is true that the LGC has enhanced

local participation in this sector but this is not enough to stop a central government that wields

much power in a unitary set-up. Moreover, this set-up has produced tensions between the central

government and the local governments which have similar powers of regulation and produced

dissonance in policies among local governments, and even between an LGU and a component

unit therein.

While a centralized government can actually come up with a comprehensive, organized

and harmonized regime on the matter that result in clear dividing lines of jurisdictions and

responsibilities, actual performance is terms of the churned out policies reflects otherwise. As

the paper discussed, what we have are fragmented- sometimes inconsistent- legal sources (even

as to one specific sector only such as small-scale mining), and administrative structures that are

necessarily created by these disjointed policies.

Federalism may be considered to eliminate the limitations of the unitary set-up. It can reduce,

if not remove the frictions between national and local interests by balancing both, or granting

concurrent jurisdictions, as well as enhance the collaboration between the national and subnational

governments and provide opportunities for improved natural resources management.

The design of a federal set-up on natural resources is essentially a n assignment of property rights

that is dependent on numerous, separate but related factors. First, the objectives must be clear.

Second, the division of powers and obligations must be responsive to these unambiguous goals.

It is important to remember though that each assignment of right may have different objectives

that would require dissimilar metrics. The vesting of ownership, for instance, may simply be

symbolic and nominal, and the constitutional provision may simply be a general statement, but the

framework for regulatory-authority control requires standards such as competence and efficiency

on the part of the assignee, and even the consideration of the principle of subsidiarity. Similarly,

the treatment of revenues may have different objectives than ownership and control, and the

criteria that may be employed could include equity and accountability.


What is important to remember, though, is that there is no ideal system. There is no model that

fits all situations. There are models as there are federal systems. No federal systems are identical,

and each responds to a milieu’s specific objectives and unique problems.


reFereNces

Anderson, George, Fiscal Federalism: A Comparative Introduction. Oxford University Press (2010)

Bauer, Andrew, Subnational Oil, Gas and Mineral Revenue Management. Natural Resource Governance Institute (2013)

Bauer, Andrew, Shortell, Paul and Delesgues, Lorenzo, Sharing the Wealth: A Roadmap for Distributing Myanmar’s Natural Resource Revenues. Natural Resource Governance Institute (2016)

Haysom, Nicholas and Kane, Sean. Briefing Paper on Negotiating natural resources for peace: Ownership, control and wealth-sharing. Henry Dunant Centre for Humanitarian Dialogue (2009)

Magno, Cielo. The Mining for Development Framework for the Philippines. UP School of Economics (2015)

Manasan, Rosario, Intergovernmental Fiscal Relations: Fiscal Federalism, and Economic Development in the Philippines. Philippine Institute for Development Studies (1992)

Morgandi, Matteo. Extractive Industries Revenues Distribution at the Sub-National Level. Revenue Watch (2008)

Philippine Extractive Industries Transparency Initiative, Extracting value in transparency:The Third PH-EITI Report. (FY 2014)

Philippine Poverty Environment Initiative, Review of Collection and Distribution of Revenues from Natural Resources. UNDP-UNEP-DILG (2012)

Shah, Anwar. A Practitioner’s Guide to Intergovernmental Fiscal Transfers. World Bank Policy Research Working Paper (2006)

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Surig

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Surig

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19

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ce o

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ata:

DBM


aNNex i-b Multi-year MiNiNg share, 2003-2013

aNNex i-c royalties share, 2015

1

Reg Province

Amount Collected LGU share

In Thousand Pesos

3 Zambales 106,828.90 42,731.56 13 Dinagat Islands 210,785.29 84,314.11 Surigao del Norte 687,618.64 275,047.46 Surigao del Sur 219,968.12 87,987.25 Total 1,225,200.95 490,080.38

Source of basic data: DBM

Source of basic data: DBM

1

A

Reg Province

Amount Collected

LGU share

In Thousand Pesos

1 La Union (2003) 801.91 320.76 La Union (2004) 581.87 232.75

La Union (2004-2013) 12,734.87 5,093.95

Pangasinan (2003, 2004, 2006-2013)

4,972.78 1,989.11

Pangasinan (2003, 2007-2010) 1,950.59 780.24

3 Bulacan (2003-2013) 53,978.01 21,591.21

Bulacan (2011-2013) 723.21 289.28

7 Negros Oriental (2006-2007) 1,091.50 436.60

11 Davao del Sur (2004-2013) 10,690.92 4,276.37

Davao del Sur (2004-2013) 11,108.58 4,443.43

Davao del Sur (2011-2013) 3,987.86 1,595.14

Davao del Sur (2012-2013) 186.25 74.50