COAL DEVELOPMENT

ACT OF 1976
(PRESIDENTIAL DECREE 972)

P.D. 972
Enacted on July 28, 1976

Decree aims to:

promote an accelerated exploration, development, exploitation, production
and utilization of coal;

Encourage the participation of the private sector with sufficient capital,

technical and managerial resources in the exploitation and production of
coal resources;
Upgrade the technical and financial capabilities of coal industry

Energy Resource Development Bureau shall undertake by itself the

active exploration, development and production of coal resources

AREAS COVERED
1.
2.
3.
4.

Public Lands.
Any unreserved or unappropriated coal bearing lands.
Claims located and recorded by private parties.
Areas covered by valid and subsisting coal revocable
permits.
5. Coal leases and other existing rights granted by the
government for the exploration and exploitation of coal
lands.
6. Government mineral reservations.
7. Coal area/mines whose leases or permits are owned and
controlled by the govt.

COAL OPERATING CONTRACT (COC)

Executed on behalf of the government by the DOE Secretary.
Service, technology, and financing are furnished by the
operator.
The govt. promoted a transparent and competitive system of
awarding COCs through Competitive Public Contracting.
(CPC).
ERDB shall determine prospective coal areas. The DOE
Secretary upon recommendation of the ERDB director and
the Usec exercising supervision over the ERDB shall declare
areas open for CPC
No application will be accepted or entertained except during
CPC.

BLOCKING SYSTEM
Each coal region shall be divided into meridional blocks, each
containing 1,000 has.
No person shall be entitled to more than 15 blocks of coal
lands in any one coal region.

Alternative procedures in opening contract areas:

1. Offering an area for bids
2. Negotiating with qualified party

TERMS & CONDITIONS OF COCs

Operator shall be obliged to spend in direct prosecution
of exploration not less than what is stipulated in the
contract.
Exploration contract for 2 years. If operator has
complied with requirements, exploration period may be
extended for another 2 years.
All materials, equipments which are movable by nature
shall become property of the govt. if not removed by
operator within one year after termination of COC.
Operator is subject to provisions of laws of general
application relating to labor, health safety and ecology.

EMINENT DOMAIN
May be invoked and exercised for the entry, acquisition,
and use of private lands for purposes of coal
exploration, development and exploitation.
Prior written notice to surface owner of land or
occupant.
If surface owner of land or occupant refuses entry,
operator shall notify Bureau.
Coal operator shall post a bond in an amount fixed by
the Bureau based on type of the land.

 In the absence of an agreement:

1. For titled lands, at least Php1.00 for every ton of coal
extracted plus compensation for the value of improvements
damaged or destroyed.
2. For untitled lands .50 cents for every ton of coal plus
compensation for the value of improvements damaged or
destroyed.
3. Fort govt. reserved lands, compensation due shall accrue
equally between the supervising agency and the Bureau to
be disbursed for conservation measures.

TIMBER AND WATER RIGHTS

Coal operator may cut trees or timber within his
contract area.
If already covered by existing timber rights, timber
needed and manner shall be subject to the same rules
and agreed upon by coal operator. If no agreement is
reached, Bureau shall decide whose decision shall be
final.
Coal operator shall also enjoy water rights necessary for
exploration, development and exploitation.
Water rights already granted shall not be impaired.
Govt. reserves the right to regulate water rights and
equitable distribution to prevent monopoly of use.

PETROLEUM ACT OF 1949

(REPUBLIC ACT NO. 387)

R. A. 387
Enacted on June 18, 1949.
Aims to promote the exploration, exploitation and
utilization of the petroleum resources of the country,
and employs the concession system for the exploitation
of the nations petroleum resources.
Act affirms the concept of jura regalia that all natural
deposits or occurrences of the petroleum or natural gas
in public and private lands in the Philippines.
Exploration and exploitation concessions do not confer
ownership but only right to explore, exploit and
develop.

 Govt. reserves the right to undertake either by itself or

instrumentalities or through competent, qualified
persons.
To be executed by the President for the govt. and
approved by the Congress.
Exploration or exploitation rights may be exclusive
within certain areas but no exclusive rights may be
granted to refining or transportation.

CONCESSIONS
Non Exclusive Exploration non-exclusive right to conduct
geological or geophysical exploration.
Exploration Concession Exclusive right to explore for
petroleum within specified areas. The aim is discovery of
petroleum but not restricted to, surveying and mapping,
aerial
photography,
surface
geology,
geophysical
investigations, testing of subsurface conditions by means of
borings or structural drillings.
Exploitation Concession Exclusive right to develop
petroleum production within specified areas. The aim is
production of petroleum but not restricted to drilling and
operating wells, providing and operating pumping and
storage facilities.

 Refining Concession - Right to manufacture or refine

petroleum, or to extract its derivatives. It is the
processing or treating of petroleum by chemical or
physical means for the purpose of making or separating
marketable products.
Pipeline Concession The right to provide and operate
pipeline systems for transporting petroleum. This is a
non-exclusive right to transport petroleum, by means of
and through a pipeline or system of pipelines, between
the sources of production and/or refining and the
places defined in the pipeline concession.

FREE & NATL RESERVE AREAS

All lands within territorial limits of the Philippines which
are not within the national reserve areas, or petroleum
reservations, or not covered by valid and existing
concessions are called free areas.
Areas which have been included in any concession but
subsequently given up voluntarily, or concessions which
have expired or been cancelled, or areas found to be in
excess of the maximum areas are called national reserve
areas.

EMINENT DOMAIN
Concessionaires are given right to enter private lands
for purpose of conducting geological or geophysical
studies
Concessionaire has the obligation to indemnify the
owner of land.
In case of denial by land owner or legal occupant,
concessionaire may apply with RTC for allowing entry,
upon posting of such bond as may be fixed by court
pending final determination of the amount to be paid
by the concessionaire to the land owner or legal
occupant.

TERMS
Non-exclusive Exploration Not to exceed 2 years,
renewable for another 2 years at the discretion of the
DENR Secretary.
Exploration Concession - Initial term shall not be more
than 4 years. If concessionaire has complied with all
terms and conditions, entitled to further extensions but
not to exceed 25 years.
Exploitation Term not to exceed 25 years renewable
for another 25 years at the option of concessionaire
whose application for renewal must be made prior to
the expiration of the original term.

 Drilling must commence within one year from the date

exploitation concession is granted. Production
operations may not be suspended for more than 6
months without prior written approval of the Secretary.

Refining Concession - Term not to exceed 25 years

renewable for another 25 years at the option of
concessionaire whose application for renewal must be
made prior to the expiration of the original term.
Pipeline Concession - Term not to exceed 25 years
renewable for another 25 years at the option of
concessionaire whose application for renewal must be
made prior to the expiration of the original term.

TRANSFER OF RIGHTS
Transfer of rights may be allowed provided:

1. Prior written approval of the DENR Secretary

2. Person is qualified to acquire or hold concession.

EXTINCTION / CANCELLATION OF
RIGHTS
Exploration may be cancelled for failure to perform
work obligations for 2 consecutive years or for failure to
pay for 2 consecutive years the exploration tax.
Exploitation may be cancelled [1] for failure of
concessionaire to perform exploitation work obligations
for 2 consecutive years [2] suspending operations for
more than 6 months without prior written approval [3]
for failure to pay for 2 consecutive years the
exploitation tax [4] for failure to pay or deliver to govt.
its royalty within one year from date royalty becomes
due.

 Concession rights shall become extinguished upon [1]

expiration of its term [2] or upon cancellation or
renunciation of concession.
Upon renunciation, cancellation or expiration area covered
shall automatically become part of the national reserve.
Concessionaire has 1 year to remove all apparatus upon
renunciation, cancellation or expiration within the first term of
25 years or within 15 years of its renewal.
If cancellation, termination or renunciation occurs after the
15th year from date of renewal, all property shall become the
property of the govt. without payment or indemnification to
the concessionaire.

DEPARTMENT OF ENERGY ACT

Republic Act 7638
December 9, 1992

 Created to prepare, integrate, coordinate, supervise and

control all plans, programs, projects and activities of the
govt. in relation to energy exploration, development,
utilization, distribution and conservation.
Thrust of Philippine energy program under the law is
privatization of govt. agencies related to energy,
deregulation of the power and energy industry and
reduction of dependency on oil-fired plants
Dept. upon approval of president institute programs and
timetable of deregulation of appropriate energy projects and
activities at the end of four years from effectivity of this act;

POLICIES
1. A continuous, adequate, and economic
supply of energy in view of ultimately
achieving selfreliance.
2. To rationalize, integrate, and coordinate the
various programs towards self sufficiency
and enhanced productivity in power energy
without sacrificing ecological concerns.

ORGANIZATIONAL STRUCTURE
Tasked to prepare, integrate, coordinate, supervise and control
all plans, programs, projects and activities of govt. relative to
energy exploration, development, utilization, distribution and
conservation.
FUNCTIONS OF DEPT. SECRETARY
1. Establish policies and standards for the effective, efficient &
economical ops
2. Exercise direct supervision & control over all functions &
activities of the department
3. Devise a program of intl information on geological &
contractual conditions
4. Act as ex officio member of the board of NEDA

VISITORIAL POWERS
Secretary or his representatives shall have visitorial powers &
examining authority with non-govt. entities with contracts for
EDU to determine share of govt in revenue or product,
ascertain all funds collectible, such collectibles have actually
been collected.
RA 9136 ELECTRIC POWER INDUSTRY ACT OF 2001 (6/08/2001)
Expanded the functions of DOE by mandating the dept to
supervise the restructuring of the electricity industry
Issuance of IRR
Requisites for Admin Regulation to have force of penal law
The violation of admin regulation must be made a crime by the
delegating statue itself
Penalty must be provided by the statute itself

BUREAUS & SERVICES

ENERGY RESOURCE DEVELOPMENT BUREAU
Formulate & implement policies on EDU of energy

ENERGY UTILIZATION MANAGEMENT BUREAU

Formulate & implement policies, programs on new energy
technology, alternative fuels, undertake plans & programs to
ensure efficient and judicious utilization of conventional &
renewal energy resources
ENERGY POLICY & PLANNING BUREAU
Develop, prepare & update integrated natl plan for energy
sector; formulate energy policies, programs & strategies,
assessment on demand & supply

ELECTRIC POWER INDUSTRY ADMIN BUREAU

Supervise the restructuring of the electric power industry
(competitive market based environment encourage private
sector participation)
OIL INDUSTRY ADMINISTRATION BUREAU
Formulate & implement policies, programs on the downstream
oil industry, including import/export, storage, shipping,
transpo., refining, processing
NATIONAL TRASMISSION COPRPORATION
assume transmission functions of NPC, assume authority &
responsibility of NPC for planning, construction & centralized
operation & maintenance of its high voltage transmission
facilities, including grid interconnections and ancillary services.

POWER SECTOR ASSETS & LIABILITIES MANAGEMENT CORP.

GOCC which shall take ownership of all existing NPC generation
assets, liabilities, IPP contracts real estate & other disposable
assets.
NATIONAL ELECTRIFICATION ADMINISTRATION
Continue to be under DOE. Prepare electric cooperatives in
operating and competing under deregulated electricity market
within five years from effectivity of RA 9136

ENERGY REGULATORY BOARD

Entrusted with regulatory functions covering energy
sector to achieve coherent & effective policy formulation,
coordination, implementation & monitoring.
Regulate business of importing, exporting, re-exporting,
shipping, transporting, processing, refining, marketing, &
distributing energy resources.
Given power to determine, fix and prescribe rates
including penalty charges of all energy providers including
NPC

ENERGY REGULATORY BOARD

JURISDICTION, POWERS & FUNCTIONS
1. Fix & regulate the prices of petroleum products
2. Fix & regulate the rate schedule or prices of piped gas to be
charged by duly franchised gas companies which distribute
gas by means of underground piped system
3. Fix & regulate the rates of pipeline concessionaires under
the provisions of RA 387 as amended (Petroleum Act of
1949) as amended by PD 1700
4. Regulate the capacities of new refineries or additional
capacities of existing refineries and license refineries that
may be organized
5. Take steps necessary including temporary adjustment of
level of prices of petroleum products & payment to the Oil
price Stabilization Fund

REORGANIZED OR ABOLISHED AGENCIES

EO 172 reconstituted the BOE into ERB
Regulatory & adjudicatory powers & functions of EUMB were
also transferred to ERB pursuant to PD 1206
ERBs non-price regulatory jurisdiction, powers, & functions
were transferred to DOE via RA 7638
PROVISIONAL RELIEF
1.Upon filing of application, complaint or petition
2.At any stage and without prior hearing
3.On the basis of supporting papers duly verified &
authenticated
4.On motion of a party or motu propio
5.Without prejudice to final decision after final hearing
6.Conduct hearing w/in 30 days upon publication & notice

EFFECTIVITY OF DECISIONS/ORDERS
Decision to continue existing service or determining,
fixing, and prescribing rates shall be immediately
operative
All other orders become effective upon dates specified
therein
Controverted matters not referring to continuance shall
take effect after 15 days after notice to parties.
APPEAL on final orders taken to CA via Petition for Review
under Rule 43. Appeal to be taken within 15 days from
notice of final order or denial of motion for recon.

ELECTRIC POWER INDUSTRY REFORM ACT

RA 9136 June 8, 2001
Energy Regulatory Commission replaced ERB
Independent, quasi-judicial regulatory agency

New thrust is to tap private capital for the expansion &

improvement of the industry in order to address large
govt. debt; (Freedom from Debt Coalition vs. ERC ,GR No. 161113 June 15, 2004)
Generation and transmission sectors were centralized &
monopolistic but the distribution side was fragmented
EPIRA provides restructuring of the industry including the
privatization of assets of the NPC
Ordains the division of the industry into 4: generation,
transmission, distribution and supply

ENERGY REGULATORY COMMISSION

ERB abolished and its powers transferred to ERC including traditional
rate & service regulation functions.
EPIRA however expanded functions of ERC which has now the duty
likewise to promote competitive operations in the electricity market,
restructuring & privatization.
1. Enforce rules & regulations governing the operations of the
electricity spot market for purpose of ensuring greater supply &
rational pricing of electricity;
2. Amend or revoke after due notice & hearing the authority of
any person or entity which fails to comply with the law. In case
of divestment, allow affected party sufficient time to remedy
infraction or for an orderly disposal but no case to exceed 12
months
3. Exercise original & exclusive jurisdiction over all cases contesting
rates, fees fines & penalties imposed by the ERC including
disputes between/among players in the energy sector.

PUBLIC UTILITY MUST SUBMIT TO GOVT.

REGULATIONS
Business & operations of public utility is imbued with
public interest
Reason for submission to govt. regulations
Imperative duty of state to interpose its protective power
Valid exercise of states police power

Rate regulations calls for a careful consideration of

totality of facts & circumstances material to each
application for an upward rate revision. Rate regulators
should strain to strike balance between the clashing
interests of public utility and the consuming public and the
balance must assure a reasonable rate of return to the
public utilities without being unreasonable to the
consuming public. Republic vs. Meralco GR 141314

 ERCs field of inquiry not limited to computation of cost of

service or capital it must also balance investor and
consumer expectations in a way that broad requirements
of public interest may be meaningfully realized.
Republic vs Medina GR No. L32068
Regulation of rates to be charged by public utilities is
founded upon the police powers of the state and statutes
prescribing rules for the control and regulation of public
utilities
are
valid
exercise
thereof.
Surigao del Norte Electric Coop. vs ERB GR No. 183626

AUTHORIZED TO ISSUE PROVISIONAL RATE

INCREASES
While procedural in character, significant reforms bring
about substantial benefits specifically publication
requirement under section 4(e) Rule 3 of EPIRA
Aimed to protect the public interes vis--vis the rates and services
of electric utilities and other providers of electric power.
Ensure transparent and reasonable prices of electricity in a
regime of free and fair competition and full public accountability;
To balance interests of consumers & public utilities providing
electric power through fair & non-discriminatory treatment of the
two sectors

ERC endowed with statutory authority to approve

provisional rate under sections 44 and 80 of EPIRA

 Powers of ERB transferred to ERC under sec. 44 is in

addition to powers conferred upon ERC under section 43
Section 80 complements section 44 as it mandates
continued efficacy of applicable provisions of the laws
referred therein.
Though there is ground to grant provisional rate increase,
ERC may do so only after publication requirement;
Affected consumers are given opportunity to air their side;
Rate increase is only provisional therefore may be modified
or recall anytime.
Petition must be verified and accompanied with an
acknowledgement that a copy thereof was received by the
legislative body of the LGU concerned together with a
certification of notice of publication in newspaper of
general circulation in the same locality (NASECORE vs. ERC GR
NO. 163935)

DOWNSTREAM OIL INDUSTRY

DEREGULATION ACT OF 1996 (RA 8180)
March 28, 1996
Refers to business of importing, exporting, re-exporting,
shipping, transporting, processing, refining, storing,
distribution, marketing &/or selling, crude oil, gas, diesel,
LPG, kerosene etc.
Any person or entity may lease, or own refineries & other
downstream facilities subject only to monitoring by DOE

HISTORICAL BACKGROUND
No govt. agency regulating oil industry other than those
dealing with ordinary commodities until 1971
Refining Companies Shell, Caltex, Bataan Refining Co., & Filoil
Refining
Petroleulm Marketing Esso, Filoil, Caltex, Getty, Mobil & Shell

1971 country was hit by oil crisis. It realized the vital role
to national security, hence the govt. was prompted to
create Oil Industry Commission to regulate oil business.
Govt. also saw the need for a more active role of Filipinos
in the oil industry.
Philippine National Oil Corp (PNOC) was created on Nov. 9.
1973

 Acquired ownership ESSO and Filoil to serve as its

marketing arm.
Bought controlling shares of Bataan Refining then later put
up its own marketing subsidiary Petrophil. PNOC operated
under the business name PETRON
1984 Oil Price Stabilization Fund was created to cushion
the effects of frequent changes in the price of oil in the
world market price
May 1987 EO 172 was signed by Pres Aquino creating ERB
DOE was created pursuant to RA 7638 ( Dec. 2, 1992)
RA 8180 provided that DOE shall implement full
deregulation not later than March 1997

 November 5, 1997 RA 8180 was held unconstitutional and

its IRR under EO 392 Void
GROUNDS:
1. Arbitrary and unreasonable because it was enacted due to
alleged depletion of OPSF fund, a condition not found in RA 8180
2. Allowed the formation of de facto cartel among the big 3 players
Petron, Shell & Caltex in violation of constitutional prohibition
against monopolies, combinations in restraint in trade an unfair
competition. (Section 19, Article 12 > 1987 Constitution)

Provisions on tariff differential, inventory & predatory

pricing which were the principal props of RA 8180 did not
reach its intent to have fair competition & eradicate
monopoly. On the contrary it inhibit fair competition and
interfere with free interaction of market forces and
constrain new players (prospects) to build new facilities
because they will have to spend billions of pesos

DOWNSTREAM OIL INDUSTRY

DEREGULATION ACT OF 1998 (RA 8479)
February 10, 1998
Enacted to implement section 19, Article 12 of the
Constitution
MONOPOLY joint acquisition or maintenance by members
of a conspiracy, formed for that purpose, of the power to
control and dominate trade and commerce in a commodity
to such extent that they are able as a group to exclude
actual or potential competitors
CARTEL two or three act in concert to control market
prices and resultnt profits, the monopoly is called an
Oligopoly or CARtel . It is a combination of restraint in trade

 Under the law, any person or entity may import or

purchase any quantity of crude oil & petroleum products
from foreign or domestic source, lease or own and
operate refineries & other downstream oil facilities and
market the same.
Any person or entity shall give prior notice to DOE for
monitoring purposes prior to operations and shall report
to DOE every import/export transaction.
Single and uniform tariff duty shall be imposed an
collected both on imported crude oil and imported refined
petroleum products at the rate of 3%.
President may reduce such tariff pursuant to RA 1937 Tariff &
Customs Code
Shall automatically adjust upon implementation of Uniform Tariff
Program under WTO & ASEAN Free Trade Area commitments

 DTI & DOE mandated to take all measures to promote fair

trade and prevent cartelization, monopolies, combinations
in the restraint of trade and any unfair competition as
defined in Article 186 of the RPC and Articles 168 & 169 of
RA 8293 Intellectual Property Rights Law
DOE shall monitor the relationship between the oil
companies, and their dealers, haulers & LPG distributors.
Ensure enforcement of existing contracts, & the observance of fair
and equitable practices.

DOE empowered to conciliate and arbitrate with respect to

contractual relationship between oil companies, and their
dealers, haulers & LPG distributors involving dealers markup, freight rate, margins of LPG

ANTI-TRUST SAFEGUARDS
PROHIBITION against:
1.Cartelization any agreement, combination or concerted
action to fix prices, restrict outputs or divide markets in
restraint of trade or free competition.
2.Predatory Pricing selling or offering to sell any oil product
at a price below the sellers or offerors average variable cost
for the purpose of destroying competition or discouraging
potential competitor from entering the market.
3.Failure to comply with : submission of reportorial
requirements; use of clean & safe technologies; any order or
instruction of the DOE Secretary; registration of any fuel
additive prior to its use

REMEDIES
Direct provincial or city prosecutors having jurisdiction to
institute an action to prevent or restrain such violation
Lodge at RTC where defendants reside or his place of business
Pending final judgement, court may issue TRO

Any private individual may report any violation. In case it

is determined that violation has been committed, the
private person shall be entitled to sue for and obtain
injunctive relief as well as damages.