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Utilizing our Natural Resources in the Environmental Way

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Fernando Penarroyo

The document outlines the legal and institutional framework for resource development in the Philippines, focusing on mining laws, environmental compliance, and the impact of the COVID-19 pandemic on the industry. It discusses key legislation, the mining act, indigenous peoples' rights, and necessary permits, along with the roles of local and national governments in resource management. Additionally, it highlights the importance of ethical sourcing and the concept of a social license to operate in relation to natural resource extraction.

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Utilizing Our Natural Resources In The Environmental Way Atty. Fernando S. Peñarroyo UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW C R O S S R O A D S A T T H E I N T E R S E C T I O N O F L A W A N D S O C I E T Y THE LAW AND THE ENVIRONMENT 18 OCTOBER 2020
ATTY. FERNANDO PEÑARROYO • Master of Laws (Univ. of Melbourne), Bachelor of Laws & BS Geology, (UP) • Group’s Legal Counsel and General Manager for Business Development, Polyard Petroleum International Group Co. Ltd (energy company listed at the HK Stock Exchange) • Former Managing Partner of Puno and Peñarroyo Law • Past President, Geological Society of the Philippines • VP and Trustee, Philippine Mineral Exploration Association • Legal Counsel - National Geothermal Association of the Philippines and Philippine Chamber of Coal Mines • Legal Committee, Petroleum Association of the Philippines • Former Director, International Geothermal Association • Former Lecturer, Asian Institute of Technology (Bangkok), UP National Institute of Geological Sciences • Contributes articles on legal, regulatory and policy issues on resources and energy to Philippine Resources Journal http://www.philippine-resources.com/ • https://penarroyo.com/ 2
L E A R N I N G O U T C O M E S After the presentation, the participants are expected to: • Acquire a knowledge of the legal and institutional framework of resources development in the Philippines • Understand the important laws in relation to resources development • Learn the present state of the industry especially in light of the Covid-19 pandemic • Know the concept of “social license to operate” and “ethical sourcing” of resources • Analyze if existing environmental laws are investor-friendly or hindrance to development
C O N T E N T S • Legal and Institutional Framework • Philippine Resources Industry Update • Resources Industry in the Time of the Pandemic • The Future of Mining • Conclusion 4
L E G A L A N D I N S T I T U T I O N A L F R A M E W O R K • Constitution • Mining Act of 1995 • Indigenous Peoples Rights Act • Local Government Code • Environmental Impact Statement System • Rules of Procedure for Environmental Cases • Other laws related to resource development • Executive Order No. 79 • Investment laws in energy resource development 5
CONSTITUTION • All lands of the public domain, water, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and other natural resources are owned by the state. • The exploration, development and utilization of these natural resources are under the full control and supervision of the State. 6
CONSTITUTION • The State has the option of entering into co-production, joint venture or production sharing agreements with Philippine citizens of Philippine corporations or associations. • At least 60% of the capital of a corporation or association must be owned by Phil. Citizen to qualify as a Philippine corporation or association. 7
MINING (Exploration, Development and Utilization of Mineral Resources) DIRECT STATE PARTICIPATION (thru the Philippine Mining Dev’t Corp.) PRIVATE ENTITY (Qualified Person) Joint Venture/ Working Agreement/MOA w/ Qualified Entity National Govt. (DENR-MGB) Local Govt. (Provincial/City Govt.) Various Mining Tenements Various Mining Tenements 8
CONSTITUTION • Exception to the nationality requirement: The Constitution authorizes the President to enter into agreements with foreign- owned corporations involving either financial or technical assistance, for large- scale exploration, development and utilization of minerals, petroleum and other mineral oils. 9
M I N I N G A C T • Exploration Permit • Mineral Agreements • - MPSA • - Co-Production Agreement • - Joint Venture Agreement • Financial and Technical Assistance Agreement • Mineral Processing Permits • http://www.mgb.gov.ph/images/stori es/RA_7942.pdf • http://www.mgb.gov.ph/images/stori es/CDAO-Final.pdf 10
Areas for Mining Areas Open to Mining Operations Areas Closed to Mining Operations • all mineral resources in public or private lands, including timber or forestlands as defined in existing laws a. In military and other government reservations, except upon prior written clearance by the government agency concerned; b. Near or under public or private buildings, cemeteries, archeological and historic sites, bridges, highways, waterways, railroads, reservoirs, dams or other infrastructure projects, public or private works including plantations or valuable crops, except upon written consent of the government agency or private entity concerned; c. In areas covered by valid and existing mining rights; d. In areas expressly prohibited by law; e. In areas covered by small-scale miners as defined by law unless with prior consent of the small-scale miners f. Old growth or virgin forests, proclaimed watershed forest reserves, wilderness areas, mangrove forests, mossy forests, national parks provincial/municipal forests, parks, greenbelts, game refuge and bird sanctuaries as defined by law and in areas expressly prohibited under the National Integrated Protected Areas System (NIPAS) under Republic Act No. 7586, Department Administrative Order No. 25, series of 1992 and other laws. 11
EXPLORATIO N PERMIT • Grant gives holder the right to conduct exploration for all minerals within a specified area • Valid for 2 yrs, can be renewed for another two but cannot exceed 6 yrs • If exploration results reveal economic mineral deposits and technically feasible for mining, holder can file a declaration of mining project feasibility (MPF) • Approval of MPF shall grant the holder exclusive right to Mineral Agreement or FTAA 12
MINERAL AGREEMENT S • Mineral Production Sharing Agreement (“MPSA”) • Co-Production Agreement • Joint Venture Agreement • All agreements grant the contractor the exclusive right to conduct mining operations and to extract all mineral resources in the contract area 13
MPSA • Contractor provides the financing, technology, management and personnel necessary for the implementation of the MPSA • Valid for 25 yrs and renewable for another 25 • Government is entitled to a share in the gross production of the mining operation in the form of 4% excise tax 14
F IN A N C IA L A N D T E C H N IC A L A S S IS T A N C E A G R E E M E N T ( “ F T A A ” ) • Pursuant to the Constitution, the Mining Act provides that the President may enter into an FTAA with 100% foreign-owned corporation for the large-scale exploration, development and utilization of mineral resources. • Minimum investment of US$50M • Not applicable to cement raw materials, marble, granite, sand and gravel, and construction aggregates 15
SMALL -SCALE MINING • PD 1899 “A Decree Establishing Small Scale Mining As a New Dimension in Mineral Development” allowed local government units to issue mining permits https://mgb.gov.ph/images/stories/PD_ 1899.pdf • RA 7076 “People's Small-Scale Mining Act” (1991) mandates that all applications for small scale mining will now be under the approval of the Secretary of the DENR https://mgb.gov.ph/images/stories/DAO 2015-03.pdf • PD No. 1899 and RA No. 7076 shall continue to govern small-scale mining operations. For areas not declared as People’s Small-Scale Mining area (PSSMA) under RA No. 7076, the pertinent rules and regulations of PD 1899 shall apply. • PMRB - Accepts, process and evaluate applications and determine administrative charges and fees for Quarry, Sand and Gravel, Small Scale Mining Permits 16
I M P O R T A N T L A W S R E L A T E D T O M I N E R A L D E V E L O P M E N T • Indigenous Peoples Rights Act (“IPRA”) https://www.officialgazette.gov.ph/1997/10/29/republic-act-no-8371/ • Environmental Impact Statement (“EIS”) System http://eia.emb.gov.ph/wp-content/uploads/2016/06/PD-1586.pdf • Local Government Code of 1991 https://www.officialgazette.gov.ph/downloads/1991/10oct/19911010- RA-7160-CCA.pdf • National Integrated Protected Areas System Act (“NIPAS”) https://www.officialgazette.gov.ph/1992/06/01/republic-act-no-7586/ 17
INDIGENOUS PEOPLES RIGHTS ACT 18
INDIGENOUS PEOPLES RIGHTS ACT • Preferential rights over ancestral domains/natural resources and exercise of customary laws • Free and prior informed consent - right to self determination, respect for IP decision-making process, right to accept or reject projects on ancestral domain - Identity of proper IPs - Royalty and right to benefits • Rules on how to arrive at a decision making process of IPs • FPIC for renewal of mining agreements 19
20 Administrative Order No. 3, series of 2012 (April 13, 2012) http://ncipcar.ph/images/pdfs/nc
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LOCAL GOVERNMENT CODE 24
L O C AL G O VER N M EN T C O D E • Proponents applying for exploration applications intended for exploration activities are required to conduct consultation with all LGUs concerned, or the legislative councils (sanggunian) at the provincial, city/municipal, and barangay levels. 25
L G U S O U T R I G H T R E F U S A L O F C O N S E N T S • declaration of mining moratoriums, ban of particular technologies like open pit mining and submarine tailings disposal, opposition to energy projects like coal-fired and hydro power plants, wind farms and geothermal exploration • Industry is not paying its fair share and that mineral wealth has rarely translated into the alleviation of poverty. • Expedite and streamline the release of LGU share on revenues and taxes • Other issues: local taxation; wastes, emissions and pollution; loss of agricultural land and subsequent livelihood; threat to water resources; relocation and right of way; and health and safety of workers and communities. 26
ENVIRONMENTA L COMPLIANCE CERTIFICATE 27
E I S S Y S T E M U N D E R P R E S I D E N T I A L D E C R E E N O . 1 5 8 6 • Project proponent of environmentally critical projects and projects within environmentally critical areas must obtain an environmental compliance certificate prior to commencement • EMB/DENR as lead agency • Revised Procedural Manual for DENR Administrative Order No. 30 Series of 2003 (DAO 03-30) Implementing Rules and Regulations of PD 1586, (Published August 2007) http://eia.emb.gov.ph/wp-content/uploads/2016/06/Revised- Procedural-Manual-DAO-03-30.pdf 28
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UNDER THE MINING ACT, COMPANIES ARE REQUIRED TO FUND/DEPOSIT TO THE FOLLOWING ENVIRONMENTAL PROTECTION MEASURES: Environmental Protection and Enhancement Program (“EPEP”)- 10% of Project Cost Annual Environmental Protection and Enhancement Program - 3% to 5% of Direct Mining and Milling Cost Contingent Liability and Rehabilitation Fund  Monitoring Trust Fund - not less than PHP 50,000/month  Rehabilitation Cash Fund - 10% of the total amount to implement the EPEP or PHP5 million, which ever is lower  Environmental Trust Fund - PHP 50,000.00  Mine Waste and Tailings Fees Reserve Fund - PHP0.05/MT of mine waste produced and PHP0.10/MT of mill tailings generated  Final Mine Rehabilitation and Decommissioning Fund: Annual Provision = Cost of Implementing the Approved FMRDP x Percentage Required (in accordance with the IRR) 30
OTHER LAWS RELATED TO MINERAL DEVELOPMENT • Ecological Solid Waste Management Act https://www.officialgazette.gov.ph/2001/01/26/republic-act-no-9003-s-2001/ • Toxic Substances and Hazardous and Nuclear Wastes Control Act https://www.officialgazette.gov.ph/1990/10/26/republic-act-no-6969/ • Clean Air Act https://emb.gov.ph/wp-content/uploads/2015/09/RA-8749.pdf • Clean Water Act https://emb.gov.ph/wp-content/uploads/2015/09/RA-9275.pdf • 1976 Philippine Water Code defines the extent of the rights and obligations of water users https://www.officialgazette.gov.ph/1976/12/31/presidential-decree-no-1067-s-1976/ • 1998 Philippine Fisheries Code provides for the sustainable development of fishery and aquatic resources https://www.officialgazette.gov.ph/1998/02/25/republic-act-no-8550/ • Pollution Control Law http://r12.emb.gov.ph/wp-content/uploads/2016/04/presidential- decree-no984.pdf • National Environmental User’s Fee of 2002 https://mgb.gov.ph/images/stories/DAO_2002- 16.pdf • Palawan Council for Sustainable Development http://extwprlegs1.fao.org/docs/html/phi19797.htm • Incentives granted by the Board of Investments (BOI) pursuant to Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987 https://boi.gov.ph/wp- content/uploads/2018/02/EO-226-omnibus-investments-code.pdf 31
NATIONAL WATER RESOURCES BOARD PERMIT UNDER PD 1067 • Authorizes water extraction from surface and groundwater sources • Application should define the projected annual consumption and source/s of water and competing uses • Application fee is PhP 7,200 per permit / well / surface extraction point • Annual water charges is PhP5,000 plus a fee ranging from P12.30 to P30.55/liter/second 32
L A N D C O N V E R S I O N C E R T I F I C A T E • Required if a project structure such as road or building falls on agricultural or public land outside of the MPSA/FTAA area. • Filed with the CENRO • Filing fee of PHP1,000 and inspection fee of PHP10,000 33
O T H E R D E N R P E R M I T S A N D F E E S • TREE CUTTING PERMIT - Cutting of trees within road right of way, mining area, building site. Fee is PHP 300.00 per tree cut • WASTEWATER DISCHARGE PERMIT • PERMIT TO OPERATE Air Pollution Device for the generators • HAZARDOUS WASTE GENERATOR ID together with inspection clearance of its hazardous waste storage • MINE WASTES AND TAILINGS FEE – may be increased to PHP 0.10 per MT of mine wastes and PHP 0.15 per MT of tailings 34
E X E C U T I V E O R D E R N O . 7 9 In October 2011, a mining study group was constituted, which included the Executive Secretary and several members of the Climate Change Adaptation and Mitigation Cabinet Cluster. Input from different stakeholders were obtained, including those from the following: mining companies and allied industries and services; environmental CSO/NGOs; church groups; members of the academe; LGUs; different government agencies concerned with mining. It sets the policy framework that will guide government and other stakeholders in the implementation and operationalization of mining laws, rules and regulations. It also provides concrete steps and solutions to major issues and concerns of the mining sector. https://www.officialgazette.gov.ph/2012/07/06/executive-order-no-79-s-2012/ 35
E X E C U T I V E O R D E R N O . 7 9 Areas closed to mining applications – In addition to the areas declared Mining Act and NIPAS Act, the EO disallows applications for mineral contracts, in: • prime agricultural lands, in addition to lands covered by the Comprehensive Agrarian Reform Law of 1988, including plantations and areas devoted to valuable crops; • strategic agriculture and fisheries development zones, fish refuge and sanctuaries declared as such by the Secretary of the Department of Agriculture; • tourism development areas as identified in the National Tourism Development Plan; and • other critical areas, island ecosystems, and impact areas of mining as determined by current and existing mapping technologies, that the DENR may identify pursuant to existing laws, rules, and regulations, such as but not limited to the NIPAS Act. 36
EXECUTIVE ORDER NO. 79 • Full enforcement of environmental standards in mining • Review of existing mining operations • Moratorium on the grant of new mineral agreements pending legislation - no moratorium on the issuance of EPs, FTAAs, and Mineral Processing Permits, only MPSAs • Establishment of mineral reservations • Imposition of competitive public bidding requirement • Development of downstream industries 37
EXECUTIVE ORDER NO. 79 • Disposition of abandoned ores and valuable metals • Creation of a Mining Industry Coordinating Council • Measures on Small-Scale Mining Activities • Consistency of local ordinances with national laws • Creation of One-stop Shop for all Mining Applications • Creation of a Centralized Database for the Mining Industry and Integrated Map System to include mining related maps • Use of the Programmatic Environmental Impact Assessment 38
L E G A L R E Q U I R E M E N T S U N D E R T H E M I N I N G A C T A N D I T S I R R • Technical and financial qualifications to engage in large-scale mining in the Philippines; • The area being applied for is open and available for mining activities and is not located within any of the areas where mining is prohibited; • An approved ECC, showing that the impacts of mining in the area can be mitigated and/or remediated through proper environmental protection measures; • An approved Project Feasibility Study, showing that the mine has enough ore reserves to operate profitability, and can give government a fair share in revenues. • The endorsement/approval of the local government units (Province, Municipality/City, and Barangays) that will be impacted by the proposed mining activity; • The endorsement/approval of the indigenous peoples in accordance with FPIC, if the area being applied for is within their ancestral domains. • Requirements under EO 79 IRR - https://mgb.gov.ph/images/stories/DAO_2012-07.pdf 39
O T H E R I N V E S T M E N T L A W S I N E N E R G Y R E S O U R C E D E V E L O P M E N T • Presidential Decree (P.D.) 87, as amended, "Oil Exploration and Development Act of 1972” for petroleum service contracts – allows 100% foreign ownership https://www.officialgazette.gov.ph/1972/12/31/presidential- decree-no-87-s-1972/ • PD 972, as amended, introduced the coal service contract system and established the guidelines for coal operations – 60/40 coal operating contracts https://www.officialgazette.gov.ph/1976/07/28/presidential- decree-no-972-s-1976/ • RA 9513 “Renewable Energy Law of 2008” for renewable energy service contracts including geothermal https://www.officialgazette.gov.ph/2008/12/16/republic-act-no- 9513/ 40
RULES OF PROCEDURE FOR ENVIRONMENTAL CASES • Introduced new remedies for the “alleged” violation of environmental laws (April 13, 2010 ): - temporary environmental protection order; - writ of continuing mandamus; and - Writ of Kalikasan. • Until the new policies and institutional safeguards are fully in place, the government should strictly apply the precautionary principle. The principle is public policy under the Climate Change Act of 2009, and was enunciated by the Supreme Court in issuing the Writ of Kalikasan. • https://www.chanrobles.com/scdecisions/rulesofcourt/2010/am _09-6-8-sc_2010.php 41
P R E C A U T I O N A R Y P R I N C I P L E • A generally accepted international law principle – expressed by the Supreme Court in the Rules of Procedure for Environmental Cases (Part V, Rule 20): - Sec. 1. When there is a lack of full scientific certainty in establishing a causal link between human activity and environmental effect, the court shall apply the precautionary principle in resolving the case before it. - Sec. 2. In applying the precautionary principle, the following factors, among others, may be considered: (1) threats to human life or health; (2) inequity to present or future generations; (3) prejudice to the environment without legal consideration of the environmental rights of those affected. 42
W R I T O F K A L I K A S A N • a legal remedy available to any natural or juridical person, entity authorized by law, people’s organization, non-government organization, or any public interest group accredited by or registered with any government agency, • on behalf of persons whose constitutional right to a balance and healthful ecology is violated, or threatened • with violation by an unlawful act or omission of a public official or employee, or private individual or entity, • involving environmental damage of such magnitude as to prejudice the life, health or property of inhabitants in two or more cities or provinces. • Rules of Procedure for Environmental Cases A.M. No. 09-6-8-SC Rule 7, Sec. 1. 43
MINING INDUSTRY UNDER DUTERTE Policy Roadblocks - moratorium on new mining permits that has been in place since 2012 under Executive Order 79 and the ban on open pit mining • DMO 2016-01, issued on 08 July 2016, mandated the audit of all operating mines and moratorium on new mining projects; • DAO 2017-10, issued on 27 April 2017, banning the open pit mining method for gold, silver, copper, and complex ores; • Closure of 28 operating mines and the cancellation of 75 mineral production sharing agreements as they allegedly encroached on watersheds and destroyed marine ecosystems. 44
BAN ON OPEN PIT MINING HAS NO LEGAL BASIS AND SHOULD BE REVERSED • Open pit mining should NOT be banned in the country. It is an internationally accepted method done in many countries of the world and has been repeatedly proven to be safe for miners, the community and the environment. While the environmental footprint may be visibly large, open pit mines can be successfully rehabilitated and converted into other land uses like agriculture, forestry, and even tourism. • For shallow ore deposits, such as nickel, iron, coal, and copper, and for large non-metallic quarries, open pit mining is the only economically viable method extraction. • An open pit mining ban will also have adverse impacts on our energy security, as coal mining is done in the country only through open pit mines. 45
Manila Bay Beach Nourishment Project Dolomite Sand: Will It Help Solve the Root of the Environmental Problem In Manila Bay?
ENERGY RESOURCES ISSUES • Oil - West Philippine Sea maritime dispute - petroleum exploration moratorium lifted by DOE • Natural Gas - Malampaya gas field depletion, no new gas fields discovered, no legal framework, lack of available natural gas infrastructure network • Coal - modest indigenous reserves, ban on open pit mining, expiring coal operating contracts - end of 50 year limit • Geothermal - dropped in world ranking, permitting requirements, grid connectivity, incentives for new technology • Nuclear - no legal and regulatory framework, new technologies, social and environmental acceptability 47
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MINING OPERATIONS IN THE TIME OF COVID -19 • Metallic mineral production went down by 14.37% in 1H 2020 • Government issued several regulations: • Realignment of Social Development and Management Program Budget raised PHP 402M for COVID-19 response • Extension of deadlines • Protocols for the resumption of mining and mineral processing operations/workforce and working arrangements • Guidelines for shipment of minerals and mineral products 49
PHL MINING INDUSTRY IN THE TIME OF COVID -19 Mining sector is optimistic • An export industry, it was allowed to continue operating but with precautionary measures • Lifting of the moratorium on new permits is anchored on the passage of a new mining tax regime. • Indonesia's ban on nickel exports will be a boon to the Philippines • Output and value of exports will recover once pandemic-related restrictions are lifted, & gov’t encourage consumer demand and implement economic stimulus initiatives • To cover mounting expenses to address the COVID-19 pandemic, the government is looking at privatizing some of its mining assets. 50
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The oil and gas industry experienced its third price collapse in 12 years. 52
DROP IN RE CAPACITY • 167 GW of renewable capacity will be added in 2020, a 13% drop compared to the rise in 2019 and the first decline in the growth rate in 20 years. Overall worldwide renewable capacity is still set to increase by 6%. • The drop reflected “delays in construction activity due to supply chain disruption, lockdown measures and social-distancing guidelines”. • Dwindling prices for green tech are proving to be no match for COVID-19. The economics, while steadily improving, “will not be enough to shelter renewables from the impacts of coronavirus, including the economic downturn,” 53
NEW ECONOMY MINERALS • Digital technologies have resulted in a change in commodity demand for critical minerals such as cobalt, lithium and copper. These minerals are required to manufacture energy conversion and storage equipment needed to supply the renewable energy industry. • The rise of electric vehicles and the production of an ever-growing variety of high tech and green technologies, from batteries, smart phones and laptops to advanced defense systems have also boosted demand and competition for new world commodities. 54
TECH GIANTS EMERGING FROM CORONAVIRUS CRISIS STRONGER THAN EVER • Amazon, Apple, Facebook, Google and Microsoft are aggressively placing new bets as the coronavirus pandemic has made them near-essential services. • Combined, they are sitting atop about $557 billion, enabling them to maintain a pace of acquisitions and investments. • They have been among the top corporate spenders on research and development for most of the last decade. • Without any pushback from regulators, big tech companies would almost unquestionably come out of the pandemic more powerful. • Tech giants are on the hunt for investment opportunities in the mining sector, in a push that is destined to change the landscape of the resources industry. 55
Conclusion • Mining industry will continue to remain relevant in this era of digitization and sustainability. • Demand for new world commodities is going to increase as they become central to the production of an ever-growing variety of high tech and green technologies. • Ethical Sourcing of Minerals for Tech Companies - Smarter and Greener? • In the age of digital technology and renewables, tech companies will invest in if not dominate the resources industry. • Can the Philippine mining industry adapt to the “new world economy”? 56
Utilizing Our Natural Resources In The Environmental Way Atty. Fernando S. Peñarroyo YOU CAN FIND US AT: https://penarroyo.com

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Utilizing our Natural Resources in the Environmental Way

  • 1. Utilizing Our Natural Resources In The Environmental Way Atty. Fernando S. Peñarroyo UNIVERSITY OF THE PHILIPPINES COLLEGE OF LAW C R O S S R O A D S A T T H E I N T E R S E C T I O N O F L A W A N D S O C I E T Y THE LAW AND THE ENVIRONMENT 18 OCTOBER 2020
  • 2. ATTY. FERNANDO PEÑARROYO • Master of Laws (Univ. of Melbourne), Bachelor of Laws & BS Geology, (UP) • Group’s Legal Counsel and General Manager for Business Development, Polyard Petroleum International Group Co. Ltd (energy company listed at the HK Stock Exchange) • Former Managing Partner of Puno and Peñarroyo Law • Past President, Geological Society of the Philippines • VP and Trustee, Philippine Mineral Exploration Association • Legal Counsel - National Geothermal Association of the Philippines and Philippine Chamber of Coal Mines • Legal Committee, Petroleum Association of the Philippines • Former Director, International Geothermal Association • Former Lecturer, Asian Institute of Technology (Bangkok), UP National Institute of Geological Sciences • Contributes articles on legal, regulatory and policy issues on resources and energy to Philippine Resources Journal http://www.philippine-resources.com/ • https://penarroyo.com/ 2
  • 3. L E A R N I N G O U T C O M E S After the presentation, the participants are expected to: • Acquire a knowledge of the legal and institutional framework of resources development in the Philippines • Understand the important laws in relation to resources development • Learn the present state of the industry especially in light of the Covid-19 pandemic • Know the concept of “social license to operate” and “ethical sourcing” of resources • Analyze if existing environmental laws are investor-friendly or hindrance to development
  • 4. C O N T E N T S • Legal and Institutional Framework • Philippine Resources Industry Update • Resources Industry in the Time of the Pandemic • The Future of Mining • Conclusion 4
  • 5. L E G A L A N D I N S T I T U T I O N A L F R A M E W O R K • Constitution • Mining Act of 1995 • Indigenous Peoples Rights Act • Local Government Code • Environmental Impact Statement System • Rules of Procedure for Environmental Cases • Other laws related to resource development • Executive Order No. 79 • Investment laws in energy resource development 5
  • 6. CONSTITUTION • All lands of the public domain, water, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and other natural resources are owned by the state. • The exploration, development and utilization of these natural resources are under the full control and supervision of the State. 6
  • 7. CONSTITUTION • The State has the option of entering into co-production, joint venture or production sharing agreements with Philippine citizens of Philippine corporations or associations. • At least 60% of the capital of a corporation or association must be owned by Phil. Citizen to qualify as a Philippine corporation or association. 7
  • 8. MINING (Exploration, Development and Utilization of Mineral Resources) DIRECT STATE PARTICIPATION (thru the Philippine Mining Dev’t Corp.) PRIVATE ENTITY (Qualified Person) Joint Venture/ Working Agreement/MOA w/ Qualified Entity National Govt. (DENR-MGB) Local Govt. (Provincial/City Govt.) Various Mining Tenements Various Mining Tenements 8
  • 9. CONSTITUTION • Exception to the nationality requirement: The Constitution authorizes the President to enter into agreements with foreign- owned corporations involving either financial or technical assistance, for large- scale exploration, development and utilization of minerals, petroleum and other mineral oils. 9
  • 10. M I N I N G A C T • Exploration Permit • Mineral Agreements • - MPSA • - Co-Production Agreement • - Joint Venture Agreement • Financial and Technical Assistance Agreement • Mineral Processing Permits • http://www.mgb.gov.ph/images/stori es/RA_7942.pdf • http://www.mgb.gov.ph/images/stori es/CDAO-Final.pdf 10
  • 11. Areas for Mining Areas Open to Mining Operations Areas Closed to Mining Operations • all mineral resources in public or private lands, including timber or forestlands as defined in existing laws a. In military and other government reservations, except upon prior written clearance by the government agency concerned; b. Near or under public or private buildings, cemeteries, archeological and historic sites, bridges, highways, waterways, railroads, reservoirs, dams or other infrastructure projects, public or private works including plantations or valuable crops, except upon written consent of the government agency or private entity concerned; c. In areas covered by valid and existing mining rights; d. In areas expressly prohibited by law; e. In areas covered by small-scale miners as defined by law unless with prior consent of the small-scale miners f. Old growth or virgin forests, proclaimed watershed forest reserves, wilderness areas, mangrove forests, mossy forests, national parks provincial/municipal forests, parks, greenbelts, game refuge and bird sanctuaries as defined by law and in areas expressly prohibited under the National Integrated Protected Areas System (NIPAS) under Republic Act No. 7586, Department Administrative Order No. 25, series of 1992 and other laws. 11
  • 12. EXPLORATIO N PERMIT • Grant gives holder the right to conduct exploration for all minerals within a specified area • Valid for 2 yrs, can be renewed for another two but cannot exceed 6 yrs • If exploration results reveal economic mineral deposits and technically feasible for mining, holder can file a declaration of mining project feasibility (MPF) • Approval of MPF shall grant the holder exclusive right to Mineral Agreement or FTAA 12
  • 13. MINERAL AGREEMENT S • Mineral Production Sharing Agreement (“MPSA”) • Co-Production Agreement • Joint Venture Agreement • All agreements grant the contractor the exclusive right to conduct mining operations and to extract all mineral resources in the contract area 13
  • 14. MPSA • Contractor provides the financing, technology, management and personnel necessary for the implementation of the MPSA • Valid for 25 yrs and renewable for another 25 • Government is entitled to a share in the gross production of the mining operation in the form of 4% excise tax 14
  • 15. F IN A N C IA L A N D T E C H N IC A L A S S IS T A N C E A G R E E M E N T ( “ F T A A ” ) • Pursuant to the Constitution, the Mining Act provides that the President may enter into an FTAA with 100% foreign-owned corporation for the large-scale exploration, development and utilization of mineral resources. • Minimum investment of US$50M • Not applicable to cement raw materials, marble, granite, sand and gravel, and construction aggregates 15
  • 16. SMALL -SCALE MINING • PD 1899 “A Decree Establishing Small Scale Mining As a New Dimension in Mineral Development” allowed local government units to issue mining permits https://mgb.gov.ph/images/stories/PD_ 1899.pdf • RA 7076 “People's Small-Scale Mining Act” (1991) mandates that all applications for small scale mining will now be under the approval of the Secretary of the DENR https://mgb.gov.ph/images/stories/DAO 2015-03.pdf • PD No. 1899 and RA No. 7076 shall continue to govern small-scale mining operations. For areas not declared as People’s Small-Scale Mining area (PSSMA) under RA No. 7076, the pertinent rules and regulations of PD 1899 shall apply. • PMRB - Accepts, process and evaluate applications and determine administrative charges and fees for Quarry, Sand and Gravel, Small Scale Mining Permits 16
  • 17. I M P O R T A N T L A W S R E L A T E D T O M I N E R A L D E V E L O P M E N T • Indigenous Peoples Rights Act (“IPRA”) https://www.officialgazette.gov.ph/1997/10/29/republic-act-no-8371/ • Environmental Impact Statement (“EIS”) System http://eia.emb.gov.ph/wp-content/uploads/2016/06/PD-1586.pdf • Local Government Code of 1991 https://www.officialgazette.gov.ph/downloads/1991/10oct/19911010- RA-7160-CCA.pdf • National Integrated Protected Areas System Act (“NIPAS”) https://www.officialgazette.gov.ph/1992/06/01/republic-act-no-7586/ 17
  • 19. INDIGENOUS PEOPLES RIGHTS ACT • Preferential rights over ancestral domains/natural resources and exercise of customary laws • Free and prior informed consent - right to self determination, respect for IP decision-making process, right to accept or reject projects on ancestral domain - Identity of proper IPs - Royalty and right to benefits • Rules on how to arrive at a decision making process of IPs • FPIC for renewal of mining agreements 19
  • 20. 20 Administrative Order No. 3, series of 2012 (April 13, 2012) http://ncipcar.ph/images/pdfs/nc
  • 21. 21
  • 22. 22
  • 23. 23
  • 25. L O C AL G O VER N M EN T C O D E • Proponents applying for exploration applications intended for exploration activities are required to conduct consultation with all LGUs concerned, or the legislative councils (sanggunian) at the provincial, city/municipal, and barangay levels. 25
  • 26. L G U S O U T R I G H T R E F U S A L O F C O N S E N T S • declaration of mining moratoriums, ban of particular technologies like open pit mining and submarine tailings disposal, opposition to energy projects like coal-fired and hydro power plants, wind farms and geothermal exploration • Industry is not paying its fair share and that mineral wealth has rarely translated into the alleviation of poverty. • Expedite and streamline the release of LGU share on revenues and taxes • Other issues: local taxation; wastes, emissions and pollution; loss of agricultural land and subsequent livelihood; threat to water resources; relocation and right of way; and health and safety of workers and communities. 26
  • 28. E I S S Y S T E M U N D E R P R E S I D E N T I A L D E C R E E N O . 1 5 8 6 • Project proponent of environmentally critical projects and projects within environmentally critical areas must obtain an environmental compliance certificate prior to commencement • EMB/DENR as lead agency • Revised Procedural Manual for DENR Administrative Order No. 30 Series of 2003 (DAO 03-30) Implementing Rules and Regulations of PD 1586, (Published August 2007) http://eia.emb.gov.ph/wp-content/uploads/2016/06/Revised- Procedural-Manual-DAO-03-30.pdf 28
  • 29. 29
  • 30. UNDER THE MINING ACT, COMPANIES ARE REQUIRED TO FUND/DEPOSIT TO THE FOLLOWING ENVIRONMENTAL PROTECTION MEASURES: Environmental Protection and Enhancement Program (“EPEP”)- 10% of Project Cost Annual Environmental Protection and Enhancement Program - 3% to 5% of Direct Mining and Milling Cost Contingent Liability and Rehabilitation Fund  Monitoring Trust Fund - not less than PHP 50,000/month  Rehabilitation Cash Fund - 10% of the total amount to implement the EPEP or PHP5 million, which ever is lower  Environmental Trust Fund - PHP 50,000.00  Mine Waste and Tailings Fees Reserve Fund - PHP0.05/MT of mine waste produced and PHP0.10/MT of mill tailings generated  Final Mine Rehabilitation and Decommissioning Fund: Annual Provision = Cost of Implementing the Approved FMRDP x Percentage Required (in accordance with the IRR) 30
  • 31. OTHER LAWS RELATED TO MINERAL DEVELOPMENT • Ecological Solid Waste Management Act https://www.officialgazette.gov.ph/2001/01/26/republic-act-no-9003-s-2001/ • Toxic Substances and Hazardous and Nuclear Wastes Control Act https://www.officialgazette.gov.ph/1990/10/26/republic-act-no-6969/ • Clean Air Act https://emb.gov.ph/wp-content/uploads/2015/09/RA-8749.pdf • Clean Water Act https://emb.gov.ph/wp-content/uploads/2015/09/RA-9275.pdf • 1976 Philippine Water Code defines the extent of the rights and obligations of water users https://www.officialgazette.gov.ph/1976/12/31/presidential-decree-no-1067-s-1976/ • 1998 Philippine Fisheries Code provides for the sustainable development of fishery and aquatic resources https://www.officialgazette.gov.ph/1998/02/25/republic-act-no-8550/ • Pollution Control Law http://r12.emb.gov.ph/wp-content/uploads/2016/04/presidential- decree-no984.pdf • National Environmental User’s Fee of 2002 https://mgb.gov.ph/images/stories/DAO_2002- 16.pdf • Palawan Council for Sustainable Development http://extwprlegs1.fao.org/docs/html/phi19797.htm • Incentives granted by the Board of Investments (BOI) pursuant to Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987 https://boi.gov.ph/wp- content/uploads/2018/02/EO-226-omnibus-investments-code.pdf 31
  • 32. NATIONAL WATER RESOURCES BOARD PERMIT UNDER PD 1067 • Authorizes water extraction from surface and groundwater sources • Application should define the projected annual consumption and source/s of water and competing uses • Application fee is PhP 7,200 per permit / well / surface extraction point • Annual water charges is PhP5,000 plus a fee ranging from P12.30 to P30.55/liter/second 32
  • 33. L A N D C O N V E R S I O N C E R T I F I C A T E • Required if a project structure such as road or building falls on agricultural or public land outside of the MPSA/FTAA area. • Filed with the CENRO • Filing fee of PHP1,000 and inspection fee of PHP10,000 33
  • 34. O T H E R D E N R P E R M I T S A N D F E E S • TREE CUTTING PERMIT - Cutting of trees within road right of way, mining area, building site. Fee is PHP 300.00 per tree cut • WASTEWATER DISCHARGE PERMIT • PERMIT TO OPERATE Air Pollution Device for the generators • HAZARDOUS WASTE GENERATOR ID together with inspection clearance of its hazardous waste storage • MINE WASTES AND TAILINGS FEE – may be increased to PHP 0.10 per MT of mine wastes and PHP 0.15 per MT of tailings 34
  • 35. E X E C U T I V E O R D E R N O . 7 9 In October 2011, a mining study group was constituted, which included the Executive Secretary and several members of the Climate Change Adaptation and Mitigation Cabinet Cluster. Input from different stakeholders were obtained, including those from the following: mining companies and allied industries and services; environmental CSO/NGOs; church groups; members of the academe; LGUs; different government agencies concerned with mining. It sets the policy framework that will guide government and other stakeholders in the implementation and operationalization of mining laws, rules and regulations. It also provides concrete steps and solutions to major issues and concerns of the mining sector. https://www.officialgazette.gov.ph/2012/07/06/executive-order-no-79-s-2012/ 35
  • 36. E X E C U T I V E O R D E R N O . 7 9 Areas closed to mining applications – In addition to the areas declared Mining Act and NIPAS Act, the EO disallows applications for mineral contracts, in: • prime agricultural lands, in addition to lands covered by the Comprehensive Agrarian Reform Law of 1988, including plantations and areas devoted to valuable crops; • strategic agriculture and fisheries development zones, fish refuge and sanctuaries declared as such by the Secretary of the Department of Agriculture; • tourism development areas as identified in the National Tourism Development Plan; and • other critical areas, island ecosystems, and impact areas of mining as determined by current and existing mapping technologies, that the DENR may identify pursuant to existing laws, rules, and regulations, such as but not limited to the NIPAS Act. 36
  • 37. EXECUTIVE ORDER NO. 79 • Full enforcement of environmental standards in mining • Review of existing mining operations • Moratorium on the grant of new mineral agreements pending legislation - no moratorium on the issuance of EPs, FTAAs, and Mineral Processing Permits, only MPSAs • Establishment of mineral reservations • Imposition of competitive public bidding requirement • Development of downstream industries 37
  • 38. EXECUTIVE ORDER NO. 79 • Disposition of abandoned ores and valuable metals • Creation of a Mining Industry Coordinating Council • Measures on Small-Scale Mining Activities • Consistency of local ordinances with national laws • Creation of One-stop Shop for all Mining Applications • Creation of a Centralized Database for the Mining Industry and Integrated Map System to include mining related maps • Use of the Programmatic Environmental Impact Assessment 38
  • 39. L E G A L R E Q U I R E M E N T S U N D E R T H E M I N I N G A C T A N D I T S I R R • Technical and financial qualifications to engage in large-scale mining in the Philippines; • The area being applied for is open and available for mining activities and is not located within any of the areas where mining is prohibited; • An approved ECC, showing that the impacts of mining in the area can be mitigated and/or remediated through proper environmental protection measures; • An approved Project Feasibility Study, showing that the mine has enough ore reserves to operate profitability, and can give government a fair share in revenues. • The endorsement/approval of the local government units (Province, Municipality/City, and Barangays) that will be impacted by the proposed mining activity; • The endorsement/approval of the indigenous peoples in accordance with FPIC, if the area being applied for is within their ancestral domains. • Requirements under EO 79 IRR - https://mgb.gov.ph/images/stories/DAO_2012-07.pdf 39
  • 40. O T H E R I N V E S T M E N T L A W S I N E N E R G Y R E S O U R C E D E V E L O P M E N T • Presidential Decree (P.D.) 87, as amended, "Oil Exploration and Development Act of 1972” for petroleum service contracts – allows 100% foreign ownership https://www.officialgazette.gov.ph/1972/12/31/presidential- decree-no-87-s-1972/ • PD 972, as amended, introduced the coal service contract system and established the guidelines for coal operations – 60/40 coal operating contracts https://www.officialgazette.gov.ph/1976/07/28/presidential- decree-no-972-s-1976/ • RA 9513 “Renewable Energy Law of 2008” for renewable energy service contracts including geothermal https://www.officialgazette.gov.ph/2008/12/16/republic-act-no- 9513/ 40
  • 41. RULES OF PROCEDURE FOR ENVIRONMENTAL CASES • Introduced new remedies for the “alleged” violation of environmental laws (April 13, 2010 ): - temporary environmental protection order; - writ of continuing mandamus; and - Writ of Kalikasan. • Until the new policies and institutional safeguards are fully in place, the government should strictly apply the precautionary principle. The principle is public policy under the Climate Change Act of 2009, and was enunciated by the Supreme Court in issuing the Writ of Kalikasan. • https://www.chanrobles.com/scdecisions/rulesofcourt/2010/am _09-6-8-sc_2010.php 41
  • 42. P R E C A U T I O N A R Y P R I N C I P L E • A generally accepted international law principle – expressed by the Supreme Court in the Rules of Procedure for Environmental Cases (Part V, Rule 20): - Sec. 1. When there is a lack of full scientific certainty in establishing a causal link between human activity and environmental effect, the court shall apply the precautionary principle in resolving the case before it. - Sec. 2. In applying the precautionary principle, the following factors, among others, may be considered: (1) threats to human life or health; (2) inequity to present or future generations; (3) prejudice to the environment without legal consideration of the environmental rights of those affected. 42
  • 43. W R I T O F K A L I K A S A N • a legal remedy available to any natural or juridical person, entity authorized by law, people’s organization, non-government organization, or any public interest group accredited by or registered with any government agency, • on behalf of persons whose constitutional right to a balance and healthful ecology is violated, or threatened • with violation by an unlawful act or omission of a public official or employee, or private individual or entity, • involving environmental damage of such magnitude as to prejudice the life, health or property of inhabitants in two or more cities or provinces. • Rules of Procedure for Environmental Cases A.M. No. 09-6-8-SC Rule 7, Sec. 1. 43
  • 44. MINING INDUSTRY UNDER DUTERTE Policy Roadblocks - moratorium on new mining permits that has been in place since 2012 under Executive Order 79 and the ban on open pit mining • DMO 2016-01, issued on 08 July 2016, mandated the audit of all operating mines and moratorium on new mining projects; • DAO 2017-10, issued on 27 April 2017, banning the open pit mining method for gold, silver, copper, and complex ores; • Closure of 28 operating mines and the cancellation of 75 mineral production sharing agreements as they allegedly encroached on watersheds and destroyed marine ecosystems. 44
  • 45. BAN ON OPEN PIT MINING HAS NO LEGAL BASIS AND SHOULD BE REVERSED • Open pit mining should NOT be banned in the country. It is an internationally accepted method done in many countries of the world and has been repeatedly proven to be safe for miners, the community and the environment. While the environmental footprint may be visibly large, open pit mines can be successfully rehabilitated and converted into other land uses like agriculture, forestry, and even tourism. • For shallow ore deposits, such as nickel, iron, coal, and copper, and for large non-metallic quarries, open pit mining is the only economically viable method extraction. • An open pit mining ban will also have adverse impacts on our energy security, as coal mining is done in the country only through open pit mines. 45
  • 46. Manila Bay Beach Nourishment Project Dolomite Sand: Will It Help Solve the Root of the Environmental Problem In Manila Bay?
  • 47. ENERGY RESOURCES ISSUES • Oil - West Philippine Sea maritime dispute - petroleum exploration moratorium lifted by DOE • Natural Gas - Malampaya gas field depletion, no new gas fields discovered, no legal framework, lack of available natural gas infrastructure network • Coal - modest indigenous reserves, ban on open pit mining, expiring coal operating contracts - end of 50 year limit • Geothermal - dropped in world ranking, permitting requirements, grid connectivity, incentives for new technology • Nuclear - no legal and regulatory framework, new technologies, social and environmental acceptability 47
  • 48. 48
  • 49. MINING OPERATIONS IN THE TIME OF COVID -19 • Metallic mineral production went down by 14.37% in 1H 2020 • Government issued several regulations: • Realignment of Social Development and Management Program Budget raised PHP 402M for COVID-19 response • Extension of deadlines • Protocols for the resumption of mining and mineral processing operations/workforce and working arrangements • Guidelines for shipment of minerals and mineral products 49
  • 50. PHL MINING INDUSTRY IN THE TIME OF COVID -19 Mining sector is optimistic • An export industry, it was allowed to continue operating but with precautionary measures • Lifting of the moratorium on new permits is anchored on the passage of a new mining tax regime. • Indonesia's ban on nickel exports will be a boon to the Philippines • Output and value of exports will recover once pandemic-related restrictions are lifted, & gov’t encourage consumer demand and implement economic stimulus initiatives • To cover mounting expenses to address the COVID-19 pandemic, the government is looking at privatizing some of its mining assets. 50
  • 51. 51
  • 52. The oil and gas industry experienced its third price collapse in 12 years. 52
  • 53. DROP IN RE CAPACITY • 167 GW of renewable capacity will be added in 2020, a 13% drop compared to the rise in 2019 and the first decline in the growth rate in 20 years. Overall worldwide renewable capacity is still set to increase by 6%. • The drop reflected “delays in construction activity due to supply chain disruption, lockdown measures and social-distancing guidelines”. • Dwindling prices for green tech are proving to be no match for COVID-19. The economics, while steadily improving, “will not be enough to shelter renewables from the impacts of coronavirus, including the economic downturn,” 53
  • 54. NEW ECONOMY MINERALS • Digital technologies have resulted in a change in commodity demand for critical minerals such as cobalt, lithium and copper. These minerals are required to manufacture energy conversion and storage equipment needed to supply the renewable energy industry. • The rise of electric vehicles and the production of an ever-growing variety of high tech and green technologies, from batteries, smart phones and laptops to advanced defense systems have also boosted demand and competition for new world commodities. 54
  • 55. TECH GIANTS EMERGING FROM CORONAVIRUS CRISIS STRONGER THAN EVER • Amazon, Apple, Facebook, Google and Microsoft are aggressively placing new bets as the coronavirus pandemic has made them near-essential services. • Combined, they are sitting atop about $557 billion, enabling them to maintain a pace of acquisitions and investments. • They have been among the top corporate spenders on research and development for most of the last decade. • Without any pushback from regulators, big tech companies would almost unquestionably come out of the pandemic more powerful. • Tech giants are on the hunt for investment opportunities in the mining sector, in a push that is destined to change the landscape of the resources industry. 55
  • 56. Conclusion • Mining industry will continue to remain relevant in this era of digitization and sustainability. • Demand for new world commodities is going to increase as they become central to the production of an ever-growing variety of high tech and green technologies. • Ethical Sourcing of Minerals for Tech Companies - Smarter and Greener? • In the age of digital technology and renewables, tech companies will invest in if not dominate the resources industry. • Can the Philippine mining industry adapt to the “new world economy”? 56
  • 57. Utilizing Our Natural Resources In The Environmental Way Atty. Fernando S. Peñarroyo YOU CAN FIND US AT: https://penarroyo.com

Editor's Notes

  • #9: The Philippine Mining Development Corporation (PMDC) is a government-owned and controlled corporation attached to the Department of Environment and Natural Resources (DENR). PMDC is tasked to promote, develop and administer the mining properties held directly by the government.