BRIEFER ON

MINING LAWS AND ISSUES

IN THE
PHILIPPINES

I. Current Mining Industry Profile in the

Philippines

II. Legal Framework

III. Relevant Jurisprudence

IV. Mining Issues

V. Fiscal Incentives to the Philippine Mining

Industry

VI. Taxation of Mineral Products

VII. International Concerns

VIII. Future Directions in the Philippine Mining

Industry
I. CURRENT MINING INDUSTRY PROFILE IN THE
PHILIPPINES1

 According to the Mines and Geosciences Bureau (MGB),

approximately 9 million hectares of land area in the country
are identified as having high mineral potential.

 Mining Exports
In 2014, the Philippines had US$ 4.01 Billion exports of
minerals and mineral products.

Top mineral exports: copper, gold, and nickel

Major export destinations: Japan, Australia, Canada, and China

 Industry Performance (2014-2015)

Table 1
Gross Value Added in Mining and Quarrying
by Industry Group (in percent)
(1 Quarter of 2013 – 4th Quarter of 2015)
st

However, according to the MGB, the Philippine metallic

production value suffered a 20% deficit during the first three
quarters of 2015, compared to the same period last year, from
PhP107.24 billion in 2014 to PhP85.78 billion in 2015, with a
PhP21.46 billion shortfall.2

1
Retrieved from: http://mgb.gov.ph/images/links-
images/ThePhilippineMineralsIndustryAtAGlance.pdf, February 11, 2016.
2
Retrieved from: http://mgb.gov.ph/2015-05-13-02-02-11/mgb-news/181-metallic-production-
value-suffers-deficit-in-q3-2015
Based on statistics from the Philippine Statistics Authority (PSA), the
mining and quarrying industry sharply fell during the first to third
quarter of 2015, as compared to the same period in 2014.

Table 2
Gross Value Added in Mining and Quarrying by Industry Group
(1st Quarter of 2013 to 4th Quarter of 2015)
*At current prices, in million pesos

 Employment
235,000 workers currently employed in the minerals industry.
While estimates vary, it is conservatively assumed that for every
job in the industry, about four indirect jobs may be generated in
the upstream and downstream sectors.

 Taxes, Fees, and Royalties from Mining in 2014

PhP 21.41 Billion (national and local taxes, fees and royalties)
generated and contributed by the mining industry to the
Philippine economy.
  Major Mining Sites3

3
Retrieved from: http://philippinemining.imaginet.com.ph/mining-act-and-related-
content/mining-development-and-mineral-exploration-projects, on February 12 ,2016.
  The Philippines is rich in minerals and certain energy
resources. It ranks among the top ten world producers of
gold, copper, and chromite. Its mineral reserves also include
silver, nickel, cobalt, and zinc. According to the Chamber of
Mines4, the country’s mineral reserves (gold, copper, nickel,
iron, chromium and aluminum) are estimated to be worth PhP
47 trillion (US$ 840 billion). The largest untapped copper
deposit in Southeast Asia is found in Tampakan, South
Cotabato, which is considered the ground zero of mining in the
Philippines.

 Primary Mineral Commodities (2014)

o Gold: PhP 32.97 Billion estimated value of gold produced

in 2014

o Nickel: PhP80.95 Billion estimated value of nickel direct

shipping ore and mixed nickel-cobalt sulfide produced in
2014

o Copper: PhP22.76 Billion estimated value of copper

produced in 2014

 Social Development and Management

As of January 2015, an estimated PhP6.365 Billion was

committed by mining companies for the development of their
host and neighboring communities through their approved
Social Development and Management Programs. Around 711
barangays stand to benefit from the implementation of approved
community/ social projects of various companies.

 Environmental Protection and Management

An estimated total of PhP 31.489 Billion was committed by

mining companies (as of January 2015) for the implementation
of approved plans/programs/projects/activities under their

4
Chamber of Mines (2011), http://business.inquirer.net/2651/phi8lippinhwa-mining-wealth-seen-
at-840b, as cited by Antonio G. M. La Vina, Philippine Law and Ecology. Vol.1, p. 8
 Environmental Protection and Enhancement Programs and Final
Mine Rehabilitation and/or Decommissioning Plans,
respectively.

 Mining accidents during the previous years

1. Marcopper Mining5 , Marinduque (Industrial pollution) – On

March 24, 1996, a fracture in the drainage tunnel of a large
pit containing leftover mine tailings led to a discharge of
approximately 1.6 million cubic meters of toxic mine tailings
into the Makulapnit-Boac, Marinduque river system and
caused flash floods in areas along the river. One village,
Barangay Hinapulan, was buried in six feet of muddy
floodwater, causing the displacement of 4,400 families.
Twenty (20) other villages had to be evacuated. Drinking
water was contaminated, killing fish and freshwater shrimp.
Large animals such as cows, pigs and sheep were killed. The
flooding caused the destruction of crops and irrigation
channels. Following the disaster, the Boac River was
declared unusable. The United Nations then declared that the
accident to be a major environmental disaster.

2. Rapu-Rapu Mining Trajedy – Lafayette Philippines, Inc., a

domestic subsidiary of Lafayette Mining, Ltd. of Australia,
started mining in Rapu-Rapu, Albay on July 2005. Four (4)
months thereafter, the mining company showed negligence,
operating even while the mine’s structural safeguards meant
to minimize environmental damage were not yet completed.
As a result, after heavy rains in October 11 and 31, 2005,
cyanide and other contaminants from the mine spilled into
the sea and around the island, resulting in massive fish kills.
In January 2006, Lafayette was fined a total of PhP10.7
million for violating the Clean Water Act, and for violating
the conditions of their ECC. The company paid only
PhP300, 000 initially, and contested the rest of the fine,
finally agreeing to pay up six months later on June 20, when
payment for the fine was stipulated as a precondition to the
5
Assessment mission conducted under the leadership of UNEP/Water Branch, United
Nations Department of Humanitarian Affairs (March 10, 2011).
http://www.reliefweb.int/ocha_ol/programs/response/unep/unep4.html.

Note: In 1969, the Marcopper Mining Corporation began mining operations on

Marinduque Island. Placer Dome, a Canadian company, co-owned (40%) and managed
the corporation. The Mt. Tapian site was the first mining location on the island. Here,
open pit mining was used to produce copper concentrate.
 mine’s 30-day test run. Due to the massive fish scare in the
region, which came about following the fish kills, the
national government was obligated to provide PhP 10
million as emergency assistance for affected fisher folk in
the area. Initial ecological and health studies on the Rapu-
Rapu mine warned of heavy metal contamination, siltation
and other acute and long-term impacts on the marine
ecosystem, including the complications of acid mine
drainage.6

3. Compostela Valley Landslide – On April 22, 2011, a

landslide occurred in the small mining community of
Pangason-B, Kingking village in Pantukan, Compostela
Valley. It buried many homes, left eight (8) dead and many
injured. Small miners in the area allegedly have violated not
only the Small-Scale Mining Act by using explosives,
mercury, and cyanide, which are all banned for small-mining
activities.

4. Semirara Mining Accidents - Semirara Mining and Power

Corporation (Semirara Mining)7, a subsidiary of DMCI
Holdings, Inc., had the "exclusive right" to conduct
exploration, development, mining, and utilize coal in the
island, which had an estimated coal reserve of 150 million
metric tons.8 On February 13, 2013, a section of the west
wall of the Panian pit gave way before midnight on the said
date.9 Five (5) miners were confirmed dead, three (3) others
were rescued, while five 5) were never found. Police
6
Mining in Rapu-Rapu: A Countdown to Disaster. Retrieved from:
http://www.greenpeace.org/international/Global/international/planet-2/report/2007/8/mining-in-
rapu-rapu-a-countdo.pdf, on February 15, 2015.

7
Semirara Mining has a Coal Operating Contract (COC) with Department of Energy (DOE) in
1977 (amended 1981) for the exploration, development, mining and utilization of coal over
Semirara Island, Antique pursuant to Presidential Decree No. 972. On May 13, 2008, the DOE
approved the term extension of the Company’s COC from July 13, 2012 to July 14, 2027.
Semirara Island has an estimated coal reserve of around 170 million MTs. On November 12,
2009, DOE and the Company executed Second Amendment to Coal Operating Contract. The
second amendment amended the coordinates of the contract area to include an area of 3,000 and
4,200 hectares, more or less situated in Caluya Island and Sibay Island, Antique. (Sourced from
the 2014 Annual Report of the corporation).
8
“Fast Facts: Who owns Semirara?”, by Cai U. Ordinario (February 20, 2013).
Retrieved from: http://www.rappler.com/business/21968-one-of-ph-s-richest-own-
semirara, on December 3, 2015.

9
GMA Network News. Retrieved from:
 mentioned that incessant rains before the accident might
have triggered the mishap.

On July 17, 2015, nine (9) mine workers were buried alive
when a portion of the northern wall at the Panian mining site
once again collapsed in a landslide due to continuous rains
that loosed the excavated earth merely dumped atop the
wall.10

http://www.gmanetwork.com/news/story/294880/news/regions/five-miners-killed-
five-missing-as-semirara-coal-mine-collapses,Retrieved on: December 3, 2015.

10
Manila Bulletin.com. Retrieved from:
http://www.mb.com.ph/accidents-possible-semirara-mine-contract-violations-to-
be-probed/, on December 3, 2015.
II. LEGAL FRAMEWORK
Constitutional Provisions
Article XII, Section 2 on National Economy and Patrimony provides:
“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. xxxxx” (The Regalian Doctrine11)

Title to minerals cannot be transferred to private parties,

specifically the permit holders and mineral agreement grantees.

The provision likewise provides for the following:

 The State shall have full control and supervision of the exploration,
development, and utilization of natural resources

 The State may either:

1. Directly undertake such activities; or

2. May enter into co-production, joint-venture, or production-

sharing agreements with Filipino citizens, or corporations or
associations at least sixty percent (60%) of whose capital are
owned by Filipino citizens. These agreements may be for a
period not exceeding twenty-five (25) years, renewable for not
more than twenty-five (25) years.

 Congress may, by law, allow small-scale utilization of natural

resources by Filipino citizens, as well as cooperative fish farming,

11
The Regalian Doctrine (Jura Regalia) a legal concept first introduced into the
country from the West by Spain through the Laws of the Indies and the Royal
Cedulas, all lands of the public domain belong to the State. This means that the
State is the source of any asserted right to ownership of land, and is charged with
the conservation of such patrimony. (Republic v. Intermediate Appellate Court, No.
L-71285, November 5, 1987)
 with priority to subsistence fishermen and fish workers in rivers,
lakes, bays, and lagoons.

 The President may enter into agreements with foreign-owned

corporations involving either technical or financial assistance for
large-scale exploration, development, and utilization of minerals,
petroleum, and other mineral oils according to the general terms
and conditions provided by law, based on real contributions to the
economic growth and general welfare of the country. In such
agreements, the State shall promote the development and use of
local scientific and technical resources. The President shall notify
the Congress of every contract entered into in accordance with this
provision, within thirty (30) days from its execution.

Large-Scale Mining Activities

 Under the Constitution and Republic Act No. 7942 or the

Philippine Mining Act of 199512 , the exploration, development,
and utilization of natural resources13 are allowed through the grant
by the State of the following:

a. Exploration Permit (EP) - an EP grants the right to conduct

exploration for all minerals in specified areas and is recognized
under the Mining Act as the initial mode of entry.14

How acquired:

1. Upon submission of the required documentary requirements

to the MGB Regional Office concerned, the application must
be evaluated and the area applied for will be plotted to
determine if it conflicts with other mining areas or is within

Hereinafter referred to as the “Mining Act”; this law became effective on July 6,
12

2012.
13
Note: Section 4 of Executive Order No. 79 (E.O. 79) provides that “[n]o new
mineral agreements shall be entered into until a legislation rationalizing existing
revenue sharing schemes and mechanisms shall have taken effect. The DENR may
continue to grant and issue Exploration Permits under existing laws, rules, and
guidelines.”

14
Section 19 of DENR Administrative Order 2010-21 or the Consolidated
Implementing Rules and Regulations of the Mining Act of 1995 (hereinafter
referred to as the Mining Act IRR).
 areas closed to mining applications. The applicant is also
required to submit a Certificate of Environmental
Management and Community Relations Record15. Should
there be no conflict on the area applied for, the MGB issues
an area status clearance and a notice of application.

2. Upon issuance of the area status clearance and the notice of

application, the applicant must secure a certification
precondition or Certificate of Non-overlap from the National
Commission for Indigenous Peoples (NCIP) and publish,
post, or announce the notice of application on the radio.

3. After this period of publication, the applicant must secure a

certification from the DENR Panel of Arbitrators as to
whether any opposition has been filed against the application
or an adverse claim on the area applied for. Should there have
been no claim or opposition, the MGB Regional Office will
again evaluate the application and endorse the same to the
MGB Central Office, which will make a final evaluation of
the application and approve deny the same. Upon approval of
the application by the MGB Regional Office after clearance
by the MGB Central Office, the EP will be numbered,
registered and released by the MGB Regional Office to the
applicant, now holder, thereof.

4. The MGB shall issue an approval or disapproval of an EP

application within six (6) months from the date of acceptance
thereof. Further, it stated that requirements such as area status
clearance, certificate of non-overlap or certification
precondition, certificate of posting and certificate of (no)
adverse claim or protest shall be deemed waived if the
government agency concerned are not able to issue them
within the prescribed deadlines.16

15
Section 168 (Environmental Work Program) of the Mining Act IRR provides that
all applicants for Mineral Agreements and FTAAs which shall undertake
exploration activities, shall submit to the MGB Regional Office an Environmental
Work Program (EWP) which shall detail the environmental impact control and
rehabilitation activities proposed during the exploration period including the costs
to enable sufficient financial resources to be allocated to meet the environmental
and rehabilitation commitments.

16
Section 7 of E.O. 79 IRR.
 b. Mineral(s) Processing Permit (MPP) - an MPP gives the
grantee the right to engage in the processing of minerals. The
MPP shall be good for a period of five (5) years, renewable for
the like period, but not to exceed a total of twenty five (25)
years. In addition, the Mining Act may grant a foreign-owned/-
controlled corporation with an MPP17.

How Acquired:

1. Upon filing of an MPP application by the mining company,

the MGB Regional Office makes a preliminary evaluation of
the requirements supporting the application for MPP. If the
project costs less than 200 million pesos, the application will
be evaluated and approve by the MGB Regional Office. If it
costs more than 200 million pesos, the application shall be
forwarded to the MGB Central Office (MGB CO) within five
(5) days for review. If the MGB CO finds that the project
costs more than 500 million pesos, it will endorse the same to
the DENR Secretary for his or her final evaluation, and
approval or denial.

2. The MPP application will otherwise be evaluated, and

approved or denied by the MGB Director. The approved MPP
shall be numbered by the MGB CO and registered with and
released by the MGB Regional Office to the grantee thereof.

c. Mineral Production Sharing Agreements (MPSAs) – is an

agreement where the government grants the contractor the
exclusive right to conduct mining operations within a contract
area and shares in the gross output. Under the agreement, the
contractor shall provide the financing, technology, management,
and personnel necessary for the implementation of the
agreement.

The total government share in the MPSA shall be the excise tax
on mineral products as provided for in Republic Act No. 772918.
17
Section 55 of the Mining Act.
18
An Act Reducing the Excise Tax Rates on Metallic and Non-metallic Minerals and
Quarry Resources, Amending for the Purpose Section 151(a) of the National Internal
Revenue Code, as Amended, Section 151. Rates of Tax – xxx thereof. (See Chapter VI on
Taxation of Mineral Products for discussion).

(1) On coal and coke, a tax of ten pesos (P10.00) per metric ton.
 How acquired:

1. The MPSA application is carried out in much the same way

as that for the EP. Once the MGB Regional Office has
endorsed the application to the MGB CO, the latter will then
endorse the application to the DENR Secretary for final
evaluation and approval or denial thereof.

2. Upon approval of the application, the MPSA shall be

numbered by the MGB CO and registered and released by the
MGB Regional Office to the contractor. However, the Mining
Policy has suspended the grant of new mineral agreements
such as the MPSA until legislation rationalizing existing
revenue-sharing schemes and mechanisms has taken effect.19
(2) On non-metallic minerals and quarry resources, a tax of two percent (2%) based on
the actual market value of the annual 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.

(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 this Act, one percent
(1%);
(ii) On the fourth and fifth year, 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 fifteen percent (15%) of the fair international

market price thereof, on the first taxable sale, such tax to be paid by the buyer or
purchaser within 15 days from the date of actual or constructive delivery to the
said buyer or purchaser. 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.”

19
Section 7, E.O. 79.
d. Joint Venture Agreements (JVAs) – a JVA is an agreement
where a joint venture company is organized by the government
and a contractor, with both parties having equity shares. Aside
from earnings in equity, the government shall be entitled to a
share in the gross output.

e. Co-Production Agreements (CPAs) – an agreement between

the government and the contractor wherein the government shall
provide inputs to the mining operations other than the mineral
resource.

*Section 81 of the Mining Act (Government Share in Other

Mineral Agreements) provides that the government’s share in
co-production and joint venture agreements shall be negotiated
by both parties, taking into consideration the following: (a)
capital investment of the project, (b) risks involved, (c)
contribution of the project to the economy, and (d) other factors
that will provide for a fair and equitable sharing between the
parties.

f. Financial or Technical Assistance Agreements (FTAAs) - a

contract involving financial or technical assistance for large-
scale exploration, development and utilization of mineral
resources. The government’s share in FTAAs shall consist of,
among others: (a) the contractor’s corporate income tax, (b)
excise tax, (c) special allowance, (d) withholding tax due from
the contractor’s foreign stockholders arising from dividend or
interest payments.

Notes:

o The collection of the government’s share in the FTAA shall

commence after the FTAA contractor has fully recovered its
pre-operating expenses, exploration, and development
expenditures.

o In addition, where the economic viability of the ores in the

contract area is found to be inadequate to justify large-scale
mining operations, the Contractor may, at its option, convert
totally or partially its FTAA into a Mineral Agreement.

Relative to this section, the government’s share in the proceeds for

the development and utilization of national wealth are provided for
 in Sections 290 – 29220 of Republic Act No. 7160 or the Local
Government Code of 1991 (LGC).

How acquired:

1. The initial application process is again identical to that of EPs

and MPSAs. After the MGB CO has endorsed the application to
the DENR Secretary for final review, the Negotiating Panel 21
and the FTAA applicant will then negotiate the terms of the
20
Section 290 of the LGC provides that local government units (LGUs) shall have a
share of forty percent (40%) of the gross collection derived by the national
government from the preceding fiscal year from mining taxes, 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.

Section 291 of the LGC provides that LGUs shall have a share based on the
preceding fiscal year from the proceeds derived by any government agency or
government-owned and controlled corporation (GOCC) engaged in the utilization
and development of the national wealth, based on the following formula,
whichever shall produce a higher share for the LGU:

(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…including relates
surcharges, interests, or fines the government agency or GOCC would
paid if it were not otherwise exempt.

Section 292 of the LGC on the Allocation of Shares provides that:

(a)Where the natural resources are located in the province, the allocation of
shares shall be:
 Province: twenty percent (20%)
 Component City of Municipality: forty-five percent (45%)
 Barangay: thirty five percent (35%)

Where the natural resources are located in two or more provinces, or in two or
more component cities or municipalities or in two or more barangays, their
respective shares shall be computed on the basis of:

 Population – seventy percent (70%); and

 Land Area - thirty percent (30%)

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

component city:

 City – sixty five percent (65%)

 Barangay - thirty five percent (35%).
 FTAA. Once the Negotiating Panel is satisfied with the terms
and conditions of the proposed FTAA, it shall recommend its
execution and approval to the President. The President will then
approve the FTAA and notify the Congress of such within thirty
(30) calendar days. The approved FTAA will be transmitted to
the MGB Central Office for numbering, and registered and
released by the MGB Regional Office to the contractor.

(Note: E.O. 79 does not include the acceptance of applications for

FTAAs in the moratorium that is presently in place in the Philippines)

Validity and Term of Mining and Surface Rights

EP Two (2) years from Renewable for
the date of issuance further similar
periods, not
exceeding a total
term of four (4) years
for non-metallic
mineral exploration
or six (6) years for
metallic mineral
exploration
MPP Five (5) years from Renewable for
the date of issuance further similar
periods, not
exceeding a total
term of twenty five
(25) years.
MPSA Both have terms not exceeding twenty five
FTAA (25) years from the date of execution, and
are renewable for another term not
exceeding twenty five (25) years.

 Under the Mining Act and its IRR, only “qualified persons” are
allowed to hold and be granted permits and mineral agreements,
which is defined as:

21
Under Section 58 of the Mining Act IRR, the Negotiating Panel is composed of
the DENR Secretary, Director of the MGG, and representatives from the Board of
Investments/Department of Trade and Industry, National Economic Development
Council, Department of Finance, and Representatives from the DENR Regional
Offices concerned.
 a. any Filipino citizen of legal age and with capacity to
contract; or

b. a corporation, partnership, association or cooperative

organized or authorized for the purpose of engaging in
mining, with technical and financial capability to
undertake mineral resources development and duly
registered in accordance with law, at least sixty percent
(60%) of the capital of which is owned by Filipino
citizens: Provided, That a legally organized foreign-
owned corporation shall be deemed Qualified Person for
purposes of granting an EP, FTAA, or MPP only.

 During the term of the permits and mineral agreements, the holder
or grantee has the right to conduct activities therein without
interference as long as it complied with the terms and conditions of
the permit or mineral agreement.

 Additional Permits and Licenses:

o Business permits from the relevant LGU prior to the

commencement of mining operations

o For MPSA and FTAA grantees22:

- Environmental Compliance Certificate (ECC)
- Permit to operate air pollution control equipment
- Permit for wastewater discharge
- Permit to operate electrical and mechanical installation
- License to use and purchase cyanide
- Permit to purchase and use explosives
- Permit for tree-cutting and water permit(s)
- Such other relevant permits as may be required by
specific laws to the nature of the mining project.

 Closure and remediation of mining projects:

22
Required under Department of Finance Local Finance Circular No. 02-09, DENR
AO No. 2000-81 (Implementing Rules and Regulations of the Philippine Clean Air
Act of 1999), DENR AO No. 2005-10 (Implementing Rules and Regulations of the
Philippine Clean Water Act of 2004), DENR AO No. 1997-39 (Chemical Control
Order for Cyanide and Other Compounds), and Executive Order No. 58
(Rationalising Fees and Other Charges on Firearms, Explosives and Explosive
Ingredients, Security Agencies and Security Guards), among others.
 The contractor or permit holder is required to formulate a final
mine rehabilitation (FMR) or decommissioning plan (DP) or a
mine closure plan, which will be integrated to its environmental
protection and enhancement programme. The FMR/ DP will
consider all possible mine closure scenarios and contain cost
estimates for the implementation of each, taking into consideration
expected inflation, technological advances and the unique
circumstances faced by the mining operation. The estimates shall
cover the full extent of work necessary to achieve the objectives of
mine closure, such as decommissioning, rehabilitation,
maintenance and monitoring, and employee and other social costs,
including residual care, if necessary, over a 10-year period.

 Regulatory Bodies under the Mining Act:

o DENR
- Primary government agency responsible for the
conservation, management, and development of mineral
resources.
- It is authorized to enter into mineral agreements on
behalf of the government, as well as recommend
FTAAs to the President upon endorsement of the
DENR Director.

o Mines and Geosciences Bureau (MGB)

- The Director of the MGB shall recommend to the
DENR Secretary the granting of mineral agreements, or
to endorse to the DENR Secretary for action the grant
of FTAAs.
- The MGB may also cancel mining rights, mining
applications, and mining claims for noncompliance
with relevant laws, rules and regulations.
- The MGB also assists the EMB in the processing or
conduct of Environmental Impact Assessment in mining
projects.

o Mining Industry Coordinating Council (MICC)23

23
Section 9 of Executive Order No. 79 provides: “[Section 9]. Constituting the
Climate Change Adaptation and Mitigation and Economic Development Cabinet
Clusters as the Mining Industry Coordinating Council (MICC). The Climate
 - an interagency body tasked, inter alia, with
implementing the Mining Policy and conducting an
assessment and review of all mining-related laws, rules
and regulations, issuances and agreements, so as to be
able to make recommendations to improve the
allocation of revenues and risk between the government
and the mining sector.

Small-Scale Mining

 Presidential Decree No. 189924 (Establishing Small-Scale Mining

as a New Dimension in Mineral Development) and Republic Act
No. 707625 (People’s Small-Scale Mining Act of 1991) are the
relevant laws that govern small-scale mining operations. For areas
not declared as people’s small-scale mining areas (PSSMA) under
R.A. 7076, the pertinent rules and regulations of PD 1899 shall still
apply.

 People’s Small-Scale Mining Program (PSSMP)

o Identifies, segregates, and reserves certain mineral lands as

people’s small-scale mining areas.

o Regulates the small-scale mining industry to balance

economic growth, productivity, environmental protection,
and the efficient collection of government revenue.

 The Provincial/City Mining Regulatory Board (Board) are

authorized to declare and set aside people’s small-scale mining
areas (PSSMAs) in sites onshore suitable for small-scale mining,
subject to review by the DENR Secretary. Small-scale mining
operations in areas not declared as PSSMA shall be covered by
small-scale mining permits (SSMPs) issued under PD 1899. In
cases where a PSSMA is declared covering SSMP areas, the term
of the SSMPs, including their renewal, shall be recognized unless

Change Adaptation and Mitigation and Economic Development Cabinet Clusters,

shall constitute themselves into an interagency forum to be known as the Mining
Industry Coordinating Council (MICC).
24
Hereinafter referred to as “PD 1899” (January 23, 1984).

25
Hereinafter referred to as the “Small-Scale Mining Act” (June 27, 1991).
 such SSMPs are revoked, cancelled, or terminated with the
cause26: Provided, that the SSMP shall have the option to shift to a
people’s small-scale mining contract.

 Small-scale mining contracts (SSMCs) may be awarded by the

Board to small-scale miners who have voluntarily organized and
have duly registered with the appropriate government agency as an
individual miner or cooperative. Priority shall be given to
cooperatives majority of whose members are residents of the
province, city, or municipality where the small-scale mining area is
located.

 Term of a Small-Scale Mining Permit or Contact

o The two (2)-year term of an SSMP is renewable only once:

Provided, that the pertinent application shall be filed prior to
the expiration thereof, among other requirements. No SSMP
shall be renewed unless its two (2)-year term is fully
consumed.

o In the case of an SSMC, no renewal shall likewise be granted

unless its two (2)-year term is fully consumed.

 Qualification of Applicants

o For PD 1899, any qualified person may apply for an SSMP.

For this purpose, a qualified person shall mean a Filipino
citizen, of legal age, and with capacity to contract, or a
corporation of partnership authorized to engage in mining,
registered with the Securities and Exchange Commission, at
least 60% of the capital of which is owned at all times by
Filipino citizens.

o For the Small-Scale Mining Act, only a Filipino small-scale

mining cooperative organized by licensed and registered
small-scale miners may apply.
26
Section 15 (b) of MGB Administrative Order No. 41, s.1984 (Rules and regulations
Governing the Granting of Small-Scale Mining Permits under Presidential Decree 1899) provide
that: “[t]he Permit may be suspended or revoked at any time by the Director or Regional
Director, as the case may be, when in their opinion, public interest, welfare and peace and order
conditions so requires or demands or upon failure of the Permittee to comply with the other
terms and conditions stated in the Permit or for ecological reasons.”
 Maximum Capital Investment

o The maximum capital investment for a single small-scale

mining operation under P.D. 1899 or the Small-Scale
Mining Act shall be Ten Million Pesos (P10,000,000.00). This
shall cover raw, additional and existing capital, such as
processing plants, mine and hauling equipment, tools,
infrastructures, capitalized exploration and development
costs, support facilities, and working capital.

 Reliance on Manual Labor

o Small-scale mining operations under P.D. 1899 or R.A. 7076

shall be largely artisanal (made in a traditional or non-
mechanized way) with heavy reliance on manual labor and
without the use of explosives and/or blasting accessories. For
this purpose, a single unit small-scale mining operation, in
open cast or shallow underground, shall be prohibited from
using sophisticated and/or heavy equipment, i.e., excavators,
loaders, backhoes, dozers, drilling machines and/or related or
similar equipment for the extraction and/or breakage of
materials, as well as hauling equipment within the
mining/permit/contract area.

 Environmental, safety, and health concerns

o An ECC for a small-scale mining operation shall be secured
from the EMB Regional Office concerned and shall fully
conform to the provisions of the Small-Scale Mining Laws,
especially with respect to the annual production limit of
50,000 dry metric tons, and the area limitation of 20 hectares
per permit/contract.

o The following documents shall be required prior to the start

of small-scale mining under a SSMP/SSMC:

- A Potential Environment Impact Report, which is a

simplified Environmental Protection and Enhancement
Program, and a Final Mine
Rehabilitation/Decommissioning Plan duly approved by
the Mine Rehabilitation Fund Committee Concerned.
 - Community Development and Management Program, a
simplified Social Development and Management
Program, duly approved by the Mines and Geosciences
Bureau Regional Office concerned.

o Small-Scale mining operations shall strictly comply with the

provisions of DENR Department Administrative Order No.
97-30 in re: Small-Scale Mine Safety Rules and Regulations.

Related Laws

 Article II, Section 16 of the Constitution on the Right to a

Balanced and Healthful Ecology – In the case of Oposa vs.
Factoran, Jr.27, the Supreme Court held that such a right is “no less
important than any of the civil and political rights enumerated in
the [Bill of Rights].” The Court also introduced in this case the
doctrine of “intergenerational responsibility,” allowing minor
parties “to sue in behalf of succeeding generations.”

 Executive Order No. 79 – Due to the increasing concern on climate

change and environmental damage, Executive Order No. 79 was
enacted by President Benigno S. Aquino III. E.O. 79 expanded
coverage of Section 19 (Areas Closed to Mining Applications) of
the Philippine Mining Act of 1995. Protected areas categorized and
established under the National Integrated Protected Areas System
(“NIPAS”) under Republic Act No. 7586;

1. Prime agricultural lands, in addition to lands covered by

Republic Act No. 6657, including plantations and areas
devoted to valuable crops, and strategic agriculture and
fisheries development zones and fish refuge and sanctuaries
declared as such by the Secretary of the Department of
Agriculture;

2. Tourism development areas, as identified in the National

Tourism Development Plan; and

3. Other critical areas, island ecosystems, and impact areas of

mining as determined by current and existing mapping
technologies, that the DENR may hereafter identify pursuant

27
G.R. No. 101083, 224 SCRA 792, Jul. 30, 1993.
 to existing laws, rules, and regulations and the terms and
conditions of the grant thereof.

Implementation of ensuring environmental compliance is

now not solely the responsibility of the National
Government. Enforcement will now be done in coordination
with LGUs. The LGUs shall, however, 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.

Existing mining operations will now be placed under review

by a multi-stakeholder team led by the DENR. Likewise, the
use of mercury in small-scale mining is strictly prohibited
and small-scale mining shall be confined only to declared
People’s Small-Scale Mining Areas or Minahang Bayan.

 Section 137, Chapter XVI – Environmental Protection, DENR

Administrative Order 96-40, otherwise known as the
“Implementing Rules and Regulations of Republic Act No. 7924”:

The Contractor/Permit Holder/Lessee shall, among others,

perform the following:

a. In the course of its operations, produce geological,

geophysical, geochemical and other types of maps and reports
that are appropriate in scale and which in format and substance
are consistent with the internationally accepted standards and
practices. Such maps shall be made available to the scientific
community in the most convenient and cost effective forms,
subject to the condition that the Contractor/Permit
Holder/Lessee may delay release of the said information for a
reasonable period of time which shall not exceed three (3) years;
b. Systematically keep the data generated from the
contract/mining area such as cores, assays and other related
information, including economic and financial, and may make
them accessible to students, researchers and other persons
responsible for developing mining, geosciences and processing
technology subject to the condition that the Contractor/Permit
Holder/Lessee may delay release of data to the science and
technology community within a reasonable period of time
 which shall not exceed three (3) years; and
c. Replicate the data, maps and reports cited in Paragraphs (a)
and (b) and furnish the Bureau for archiving and systematic
safekeeping which shall be made available to the science and
technology community for conducting research and for
undertaking other activities which contribute to the development
of mining, geosciences and processing technology and the
corresponding manpower training and development: Provided,
That the release of data, maps and the like shall be similarly
constrained in accordance with Paragraphs (a) and (b) above.

 Indigenous People’s Rights Act of 1997 (IPRA)28:

o Right to Ancestral Domains; Right to Stay in the Territories.

(Section 7) -no Indigenous Cultural Communities/Indigenous
Peoples (ICCs/IPs) will be relocated without their free and
prior informed consent, nor through any means other than
eminent domain. Where relocation is considered necessary as
an exceptional measure, such relocation shall take place only
with the free and prior informed consent of the ICCs/IPs
concerned and whenever possible, they shall be guaranteed
the right to return to their ancestral domains, as soon as the
grounds for relocation cease to exist.

o The Ancestral Domains Office shall also issue, upon the free
and prior informed consent of the ICCs/IPs concerned,
certification prior to the grant of any license, lease or permit
for the exploitation of natural resources affecting the interests
of ICCs/IPs or their ancestral domains and to assist the
ICCs/IPs in protecting the territorial integrity of all ancestral
domains. It shall likewise perform such other functions as the
Commission may deem appropriate and necessary (Section
46a).

28
Republic Act No. 8731 (October 29, 1997).

Free and Prior Informed Consent (FIPC) —shall mean the consensus of all members of
the Indigenous Cultural Communities/Indigenous Peoples to be determined in accordance
with their respective customary laws and practices, free from any external manipulation,
interference and coercion, and obtained after fully disclosing the intent and scope of the
activity, in a language and process understandable to the community;
o Environmental Considerations (Section 58)— Ancestral
domains or portions thereof, which are found to be necessary
for critical watersheds, mangroves, wildlife sanctuaries,
wilderness, protected areas, forest cover, or reforestation as
determined by appropriate agencies with the full participation
of the ICCs/IPs concerned shall be maintained, managed and
developed for such purposes.

The ICCs/IPs concerned shall be given the responsibility to

maintain, develop, protect and conserve such areas with the
full and effective assistance of government agencies. Should
the ICCs/IPs decide to transfer the responsibility over the
areas, said decision must be made in writing. The consent of
the ICCs/IPs should be arrived at in accordance with its
customary laws without prejudice to the basic requirements
of existing laws on free and prior informed consent:
Provided, That the transfer shall be temporary and will
ultimately revert to the ICCs/IPs in accordance with a
program for technology transfer. No ICCs/IPs shall be
displaced or relocated for the purpose enumerated under this
section without the written consent of the specific persons
authorized to give consent.

o Certification Precondition (Section 59) — all departments

and other governmental agencies shall henceforth be strictly
enjoined from issuing, renewing, or granting any concession,
license or lease, or entering into any production-sharing
agreement, without prior certification from the National
Commission on Indigenous Peoples (NCIP) that the area
affected does not overlap with any ancestral domain. Such
certification shall only be issued after a field-based
investigation is conducted by the Ancestral Domains Office
of the area concerned:

No certification shall be issued by the NCIP without the free

and prior informed and written consent of ICCs/IPs
concerned: Provided, further, That no department,
government agency or government-owned or -controlled
corporation may issue new concession, license, lease, or
production sharing agreement while there is a pending
application for a Certificate of Ancestral Domain Title
(CADT. The ICCs/IPs shall also have the right to stop or
 suspend, in accordance with the IPRA, any project that has
not satisfied the requirement of this consultation process.

III. JURISPRUDENCE ON MINING LAWS

1. Narra Nickel Mining and Development Corp., et al. v. Redmont
Consolidated Mines Corp.
G.R. No. 195580, April 21, 2014

 This case calls for the application of the “grandfather rule” since
doubt prevails and persists in the corporate ownership of
petitioners. Doubt is present in the 60-40 Filipino equity
ownership of petitioners since their common investor, the 100%
Canadian corporation MBMI, funded them.

“Grandfather Rule Proper” shall be applied if the percentage of

Filipino ownership in the corporation or partnership is less than
60%, only the number of shares corresponding to such percentage
shall be counted as of Philippine nationality.

Petitioner MacArthur

 Total shares: 10,000

 MBMI owns 3,998 shares; MMC owns 5,997 shares
o MBMI owns 3,331 shares of MMC
o Olympic Mins & Development Corporation owns 6,663
shares of MMC but did not pay a single centavo.

Petitioners Tesoro and Narra

 The same structure and composition as MacArthur.

Petitioners are not Filipino since MBMI, a 100% Canadian

corporation, owns 60% or more of their equity interests. Such
conclusion is derived from grandfathering petitioners’ corporate
owners, namely: MMI, SMMI, and PLMDC. Noticeably, the
ownership of the “layered” corporations boils down to MBMI,
Olympic, or corporations under “Alpha” group wherein MBMI has
joint venture agreements with, practically exercising majority
control over the petitioners. In effect, whether looking at the
capital structure or the underlying relationships between and
among the corporations, petitioners are NOT Filipino nationals and
must be considered foreign since 60% or more of their capital
stocks or equity interests are owned by MBMI.

 The changing of applications by petitioners from Mineral

Production Sharing Agreement (MPSA) applications to another
Financial or Technical Assistance Agreements (FTAA) just because
 a case was filed against them would raise not a few sceptics’
eyebrows. It is quite obvious that it is petitioners’ strategy to have
the case dismissed against them for being “moot”.

It is quite evident that petitioners have been trying to have this case
dismissed for being “moot”. Their final act, wherein MBMI was
able to allegedly sell/assign all its shares and interest to DMCI
only proves that they were in fact not Filipino corporations from
the start. The recent divesting of interest by MBMI will not
change the stand of the Supreme Court with respect to the
nationality of petitioners prior to the suspicious change in their
corporate structures.

2. League of provinces of the Philippines v. Department of

Environment and Natural Resources (DENR), et al.
G.R. No. 175368, April 11, 2013

Article XII, Section 2(1) of the Constitution provides that the

exploration, development, and utilization of natural resources shall be
under the full control and supervision of the State.

Article XII, Section 2(3) of the Constitution provides that the Congress
may, by law, allow small-scale utilization of natural resources by
Filipino citizens.

Administrative Code of 1987 provides that the DENR is, subject to law
and higher authority, in charge of carrying out the State’s constitutional
mandate, under Section 2, Article XII of the Constitution, to control and
supervise the exploration, development, utilization, and conservation of
the country’s natural resources. Hence, the enforcement of small-scale
mining law in the provinces is made subject to the supervision, control,
and review of the DENR under the Local Government Code of 1991,
while the People’s Small Scale Mining Act of 1991 provides the People’s
Small Scale Mining Program is to be implemented by the DENR
Secretary in coordination with other concerned local government
agencies.

The constitutional guarantee of local autonomy in the Constitution refers

to the administrative autonomy of local government units or the
decentralization of government authority. It does not make local
government units sovereign within the State. Administrative autonomy
may involve devolution of powers, but subject to limitations like
following national policies or standards, and those provided by the Local
Government Code, as the structuring of the local governments and the
allocation of powers, responsibilities, and resources among the different
local government units and local officials have been placed by the
Constitution in the hands of Congress.

Clearly, the Local Government Code did not fully devolve the
enforcement of the small-scale mining law to the provincial government,
as its enforcement is subject to the supervision, control, and review of
the DENR.

The decision of the DENR Secretary, declaring the Application for

Exploration Permit of AMTC valid and given due course, and canceling
the Small-Scale Mining Permit issued by the Provincial Governor,
emanated from the power of review granted to the DENR Secretary.

3. La Bugal-Blaan Tribal Association, Inc., et al., v. Victor O. Ramos,

Secretary, Department of Natural Resources, et al.
G.R. No. 127882, January 27, 2004

E.O. No. 279

E.O. No. 279 is constitutional. It states that it shall take effect

immediately. Where a law provides for its own date of effectivity, such
date prevails over the 15-days from publication rule.

That such effectivity took place after the convening of the first Congress
is irrelevant. At the time President Aquino issued E.O. No. 279, she was
till validly exercising legislative powers under the Provisional
Constitution.

FTAA with WMCP

The FTAA is unconstitutional.

Following the literal text of the Constitution, assistance accorded by

foreign corporations in the large-scale exploration, development, and
utilization of petroleum, minerals, and mineral oils should be limited to
technical or financial assistance only.

The management or operation of mining activities by foreign

contractors, which is the primary features of service contracts, was
precisely the evil that the drafters of the Constitution sought to eradicate.
Section 1.3 of the WMCP FTAA grants WMCP the exclusive right to
explore, exploit, utilize, process, and dispose of all mineral products and
by-products thereof that may be produced from the contract area.

Section 1.2 of the WMCP FTAA states that WMCP shall provide all
financing, technology management, and personnel necessary for the
mining operations. WMCP may make expansions, improvements, and
replacements of the mining facilities and may add such new facilities as
it considers necessary for the mining operations.

These contractual stipulations, taken together, grant WMCP beneficial

ownership over natural resources that properly belong to the State and
are intended for the benefit of its citizens. These stipulations are
abhorrent to the 1987 Constitution. They are precisely the vices that the
fundamental law seeks to avoid, the evils that it aims to suppress.
Consequently, the contract from which they spring must be struck down.

The Phlippine Mining Act of 1995

The Philippine Mining Act of 1995 is invalid insofar as said Act

authorizes service contracts. Although the statute employs the phrase
financial and technical agreements in accordance with the Constitution,
it actually treats this agreements as service contracts that grant beneficial
ownership to foreign contractors contrary to the fundamental law.

In sum, the Court finds the following provisions of R.A. No. 7942 to be
violative of Section 2, Article XII of the Constitution:

(1) The proviso in Section 3 (aq), which defines "qualified person," to

wit:

Provided, That a legally organized foreign-owned

corporation shall be deemed a qualified person for
purposes of granting an exploration permit, financial or
technical assistance agreement or mineral processing
permit.

(2) Section 23, which specifies the rights and obligations of an

exploration permittee, insofar as said section applies to a financial
or technical assistance agreement.

(3) Section 33, which prescribes the eligibility of a contractor in a

financial or technical assistance agreement.
(4) Section 35, which enumerates the terms and conditions for every
financial or technical assistance agreement.

(5) Section 39, which allows the contractor in a financial and technical
assistance agreement to convert the same into a mineral
production-sharing agreement.

(6) Section 56, which authorizes the issuance of a mineral processing

permit to a contractor in a financial and technical assistance
agreement.

The following provisions of the same Act are likewise void as they are
dependent on the foregoing provisions and cannot stand on their own:

(1) Section 3 (g), which defines the term "contractor," insofar as it

applies to a financial or technical assistance agreement.

(2) Section 34, which prescribes the maximum contract area in a

financial or technical assistance agreements.

(3) Section 36, which allows negotiations for financial or technical

assistance agreements.

(4) Section 37, which prescribes the procedure for filing and
evaluation of financial or technical assistance agreement proposals.

(5) Section 38, which limits the term of financial or technical

assistance agreements.

(6) Section 40, which allows the assignment or transfer of financial or

technical assistance agreements.

(7) Section 41, which allows the withdrawal of the contractor in an

FTAA.

(8) The second and third paragraphs of Section 81, which provide for
the Government's share in a financial and technical assistance
agreement.

(9) Section 90, which provides for incentives to contractors in FTAAs

insofar as it applies to said contractors.

Implementing Rules and Regulations of the Philippine Mining Act of

1995
All provisions of the DENR A.O. No. 96-40, s. 1996, which are not in
conformity with the Supreme Court’s Decision are declared
unconstitutional.

4. Republic of the Philippines v. Marcopper Mining Corporation

G.R. No. 137174, July 10, 2000

Republic Act No. 3931 (An Act Creating The National Water And Air
Pollution Control Commission) was passed in June 18, 1964 to maintain
reasonable standards of purity for the waters and air of the country with
their utilization for domestic, agricultural, industrial and other legitimate
purposes. Said law was revised in 1976 by Presidential Decree No. 984
(Providing For The Revision Of Republic Act No. 3931, Commonly
Known As The Pollution Control Law, And For Other Purposes) to
strengthen the National Pollution Control Commission to best protect the
people from the growing menace of environmental
pollution. Subsequently, Executive Order No. 192, s. 1987 (The
Reorganization Act of the DENR) was passed. The internal
structure, organization and description of the functions of the new
DENR, particularly the Mines and Geosciences Bureau, reveals no
provision pertaining to the resolution of cases involving violations of the
pollution laws. The Mines and Geo-Sciences Bureau was created under
the said EO 192 to absorb the functions of the abolished Bureau of
Mines and Geo-Sciences, Mineral Reservations Development Board and
the Gold Mining Industry Development Board to, among others,
recommend policies, regulations and programs pertaining to mineral
resources development; assist in the monitoring and evaluation of the
Bureaus programs and projects; and to develop and promulgate
standards and operating procedures on mineral resources development.
On the other hand, the PAB was created and granted under the same EO
192 broad powers to adjudicate pollution cases in general.

The power of the mines regional director does not foreclose PABs
authority to determine and act on complaints filed before it. The power
granted to the mines regional director to issue orders requiring the
contractor to remedy any practice connected with mining or quarrying
operations or to summarily suspend the same in cases of violation of
pollution laws is for purposes of effectively regulating and monitoring
activities within mining operations and installations pursuant to the
environmental protection and enhancement program undertaken by
contractors and permittees in procuring their mining permit. While the
mines regional director has express administrative and regulatory
powers over mining operations and installations, it has no adjudicative
powers over complaints for violation of pollution control statutes and
regulations.

Adjudication of pollution cases generally pertains to the Pollution

Adjudication Board (PAB) except where the special law provides for
another forum. However, contrary to the ruling of the Court of Appeals,
RA 7942 does not provide for another forum inasmuch as RA 7942 does
not vest quasi-judicial powers in the Mines Regional Director. The
authority is vested and remains with the PAB.

Neither was such authority conferred upon the Panel of Arbitrators and
the Mines Adjudication Board which were created by the said law. The
provisions creating the Panel of Arbitrators for the settlement of
conflicts refers to disputes involving rights to mining areas, mineral
agreements or permits and those involving surface owners, occupants
and claim-holders/concessionaires. The scope of authority of the Panel
of Arbitrators and the Mines Adjudication Board conferred by RA 7942
clearly exclude adjudicative responsibility over pollution cases.
Nowhere is there vested any authority to adjudicate cases involving
violations of pollution laws and regulations in general.

IV. ISSUES
1. Balancing of Interest with IPRA

The passage of the Indigenous Peoples Rights Act (IPRA) in 1997

further required any mining activity to first obtain the free prior and
informed consent (FPIC) of any affected indigenous people (IP), and the
conditions of which consent must be written and contained in a
Memorandum of Agreement (MOA) and the IP duly assisted also by the
representative from the National Commission on Indigenous People
(NCIP) who serves as an adviser and guide of the IP in making such
agreement or MOA.
As found by the Fact Finding Mission to the Philippines, the FPIC is
sometimes obtained through misinformation, misrepresentation, bribery
and intimidation. Government agencies, in particular the NCIP, are,
according to indigenous people the team talked to, failing to fulfill their
mandate to protect indigenous peoples’ rights. Many indigenous peoples
view the NCIP as siding with mining companies. They feel the need for
an independent body to ensure indigenous peoples are adequately
informed about plans to operate and expand mines, and to assist them in
representing their views.

2. Environmental Protection/Ecology

The Philippines has relatively strong laws designed to protect the

environment, communities and indigenous peoples. The reality,
however, is that where investments are concerned the law is too often
viewed as a mere technicality to be overlooked or circumvented.
The Philippines is one of the 17 countries in the world to be categorized
as a mega-biodiversity country. It is also a geo-hazard hotspot, prone to
typhoons, earthquakes, landslides and volcanoes. Its environmental
sustainability is already under serious threat with the United Nations
Development Programme (UNDP) highlighting the urgent need to
properly manage the country’s natural resources if Millennium
Development Goal (MDG) 7 is to be achieved. These factors, together
with potential social impacts, should require the Philippine government
to exercise extreme caution in authorizing large-scale mining projects.
With the advent of Climate Change or Global Warming, people have
shifted their focus from utilization to preservation. The environmental
community has been clamoring for the government to push for stringent
environmental protection.
Moreover, according to the 10-year review of the mining industry
published by International Institute for Environment and Development,
despite the emergence of global rules for best practices in the mining
industry, more often than not, there is lack of implementation,
independent verification, public reporting, or consequences of non-
compliance.

It was recommended that the Department of Environment and Natural

Resources (DENR) be restructured to focus exclusively on the protection
and development of the Philippines environment and renewable natural
resources. A Department of Mines, Hydrocarbons and Geosciences
could deal with licensing of mining and hydrocarbon development and
ensure compliance with the highest international technical standards. It
was also recommended to consider establishing an office of Mining
Ombudsman in response to the findings that mining laws are, more often
than not, circumvented.

3. Jurisdictional Challenges Posed by National-LGU Conflicted

Policies

According to Fraser Institute Annual Survey of Mining Companies

2010-2011, the Philippines ranked 66 out of 79 in the policy
attractiveness survey. The policy potential index of the Philippines is
poor in terms of infrastructure, timely and efficient administration of
legal processes, and transparent and non-corrupt governance. To address
the mining issues on economic, environmental and lack in enforcement,
President Benigno Aquino III issued Executive Order No. 79 (“EO 79″).

Since the advent of the Local Government Code in 1991 and supported
by the Philippine Mining Act of 1995, all activities – especially mining
from exploration, development until commercial operations – must
obtain the endorsement and approval of the LGUs and its inhabitants
concerned to be able to obtain an exploration permit including permits to
develop, operate and transport, and sell mineral products.

While there is a presumption that national legislation is superior over

LGU legislation, considering the impact of mining on the environment
and the lives of the local people, the LGU must have a “bigger say”
when it comes to mining policies.

4. Role of CSOs, NGOs, Church, etc.

The Catholic Bishops of the Philippines attracted international attention
because of their concerns regarding the proposed expansion of the
mining industry, which has already had major negative impacts on local
communities and the environment. In their view “[t]he implementation
of the Mining Act will certainly destroy both the environment and
people and will lead to national unrest.”

5. Issue of “Fair Share”

The government is not getting its “fair share” in the mining industry as
espoused by President Aquino III. Mining contractors of Mineral
Production Sharing Agreement and Financial or Technical Assistance
Agreements can avail of fiscal and non-fiscal incentives granted under
the Omnibus Investment Code of 1987, as amended. In addition to these
incentives, the Mining Act also granted incentives for pollution control
devises, for income tax carry forward of losses, for income tax
accelerated depreciation on fixed assets, and investment guarantees,
such as investment repatriation, earning remittance, freedom from
expropriation, and requisition of investment, and confidentiality of
information.

References:

Arangkada Philippines 2010: A Business Perspective. Joint Foreign

Chambers Advocacy Paper.

Philippines Mining Law Update: Features of the New EO 79.

http://zglaw.com/wp/philippines-mining-law-update-features-of-the-
new-eo-79/

Understanding mining: part 1. BIZLINKS by Rey Gamboa. Discussion

contributed by Atty. Deo G. Contreras.
http://www.philstar.com/business/2014/02/04/1286277/understanding-
mining-part-1

Fact Finding Mission to the Philippines Report. Mining in the

Philippines Concerns and conflicts. Report of a Fact-Finding Trip to the
Philippines, July-August 2006.
V. FISCAL INCENTIVES TO PHILIPPINE MINING
INDUSTRY

 Mining industry Enterprises engaged in mining activities are entitled

to register for Board of Investments (BOI) incentives under
Executive Order No. 226 as amended, otherwise known as the
Omnibus Investments Code of 1987. The following are these
incentives:

 Tax Exemptions

A. Income Tax Holiday (ITH)

1. BOI registered enterprises shall be exempt from the payment

of income tax reckoned from the approved target or actual
date of commercial operations, whichever comes first, but in
no case earlier than the date of registration, as follows:

 Six (6) years for new projects granted pioneer status;

 Six (6) years for projects located in Less Developed
Areas (LDAs), regardless of status (pioneer or non-
pioneer) or type of projects (new or expansion);
 Four (4) years for new projects granted non-pioneer
status; and
 Three (3) years for expansion and modernization
projects. (As a general rule, ITH shall be limited only to
incremental sales given a specified base year).

2. New registered pioneer and non-pioneer enterprises and those

located in LDAs may avail of a bonus year in any of the
following cases:

 The indigenous raw materials used in the manufacture

of the registered product is at least fifty percent (50%)
of the total cost of raw materials for the preceding years
prior to the extension unless the BOI prescribes a
higher percentage; or
 The ratio of total imported and domestic capital
equipment to the number of workers for the project
does not exceed US$25,000 to one (1) direct labor; or
  The net foreign exchange savings or earnings amount to
at least US$500,000 annually during the first three (3)
years of operation.

In no case shall a registered firm avail of ITH for a period

exceeding eight (8) years.

B. Exemption from taxes and duties on imported spare parts

A registered enterprise with a bonded manufacturing warehouse

shall be exempt from customs duties and national internal revenue
taxes on its importation of required supplies/spare parts for
consigned equipment or those imported with incentives. The
availment period shall not exceed ten (10) years from date of
registration.

C. Exemption from wharfage dues and export tax, duty, impost, and
fees

All enterprises registered under the IPP will be given a ten (10)
year period from the date of registration to avail of the exemption
form wharfage dues and any export tax, impost, and fees on its
non-traditional export products.

D. Tax and duty-free importation of breeding stocks and genetic

materials

Agricultural production and processing projects will be exempt

from the payment of all taxes and duties on their importation of
breeding stocks and genetic materials within ten (10) years from
the date of registration or commercial operations.

Tax Credits

A. Tax credit on the purchase of domestic breeding stocks and

genetic materials

A tax credit equivalent to one hundred percent (100%) of the value

of national internal revenue taxes and customs duties that would
have been waived (had these been imported) on the purchase of
local breeding stocks and genetic materials within ten (10) years
from the date of registration or commercial operations.
 B. Tax credit on raw materials and supplies

Tax credit equivalent to the national internal revenue taxes and

duties paid on raw materials, supplies, and semi-manufactured
products used in the manufacture of export products and forming
part thereof.

Additional Deductions from Taxable Income

A. Additional deduction for labor expense (ADLE)

For the first five (5) years from the date of registration, a registered
enterprise shall be allowed an additional deduction from taxable
income equivalent to fifty percent (50%) of the wages of additional
skilled and unskilled workers in the direct labor force. This
incentive shall be granted only if the enterprise meets a prescribed
capital to labor ratio and shall not be availed of simultaneously
with ITH.

This additional deduction shall be doubled or become one hundred

percent (100%) if the activity is located in an LDA. The privilege,
however, is not granted to mining and forestry-related projects as
they would naturally be located in certain areas to be near their
source of raw materials.

ADLE cannot be simultaneously availed of with ITH.

B. Additional deduction for necessary and major infrastructure

work
A registered enterprise locating in LDAs or in areas deficient in
infrastructure, public utilities, and other facilities may deduct from
taxable income an amount equivalent to the expenses incurred in
the development of necessary and major infrastructure works.

Zero-rated Value-Added Tax (VAT)

The BOI endorses to the BIR two types of zero percent (0%) VAT
applications:

A. For purchases of raw materials and supplies used in the

manufacture and which form part of the registered export product;
and
B. For purchases of goods, services, or properties of firms exporting
one hundred percent (100%) of their product. (Motor vehicles are
 not covered, except specialized vehicles such as backhoe, forklift,
etc.)

Non-fiscal Incentives

A. Employment of foreign nationals

A registered enterprise may be allowed to employ foreign nationals
in supervisory, technical, or advisory positions for five (5) years
from the date of registration. The position of president, general
manager, and treasurer of foreign-owned registered enterprises or
their equivalent shall not, however, be subject to the foregoing
limitations.

B. Simplification of customs procedures for the importation of

equipment, spare parts, raw materials, and supplies and exports of
processed products.

C. Importation of consigned equipment for a period of ten (10) years

from the date of registration, subject to posting of a re-export bond.

D. The privilege to operate a bonded manufacturing/trading

warehouse subject to Customs rules and regulations.

In addition, the following incentives are available under Republic Act

No. 7942, also known as the Philippine Mining Act of 1995:

• Exemption from real property tax and other taxes or assessments

of pollution control devices on land or buildings;

• Net operating loss carry-forward for the first ten years of

operation against taxable income for the five years immediately
following the year of such loss;

• Accelerated depreciation; and

• Option to deduct from taxable income the accumulated

exploration and development costs or those incurred or paid during
the taxable year, subject to certain limitations.

VI. TAXATION OF MINERAL PRODUCTS

1. Income Tax - Domestic corporations are generally subject to
Philippine income tax at the rate of 30% on their taxable income
derived during the tax year from all sources within the Philippines
and abroad.

The Tax Code also imposes a Minimum Corporate Income Tax

(“MCIT”) of 2% of the gross income as of the end of the taxable
year, on domestic and resident foreign corporations subject to normal
income tax rates. A corporation is liable to pay the MCIT only when:

• the corporation has zero or negative taxable income; or

• the amount of MCIT is greater than the normal income tax due
from such corporation.

The Tax Code allows any excess of the MCIT over the normal income
tax to be carried forward on an annual basis and credited against the
normal income tax for three immediately succeeding taxable years.

2. Excise Tax (An Act Reducing the Excise Tax Rates on Metallic and
Non-metallic Minerals and Quarry Resources, Amending for the
Purpose Section 151(a) of the National Internal Revenue Code, as
Amended, Section 151. Rates of Tax – xxx thereof. )

(1) On coal and coke, a tax of ten pesos (P10.00) per metric ton.

(2) On non-metallic minerals and quarry resources, a tax of two percent

(2%) based on the actual market value of the annual 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.

(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 this Act, one percent
(1%);

(ii) On the fourth and fifth year, 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 fifteen percent (15%) of the fair

international market price thereof, on the first taxable sale, such tax to be
paid by the buyer or purchaser within 15 days from the date of actual or
constructive delivery to the said buyer or purchaser. 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.”

3. Sections 290 – 29229 of Republic Act No. 7160 or the Local

Government Code of 1991 (LGC) –

Section 290 of the LGC provides that local government units (LGUs)
shall have a share of forty percent (40%) of the gross collection derived
by the national government from the preceding fiscal year from mining
taxes, 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.

Section 291 of the LGC provides that LGUs shall have a share
based on the preceding fiscal year from the proceeds derived by any
government agency or government-owned and controlled corporation
(GOCC) engaged in the utilization and development of the national

29
wealth, based on the following formula, whichever shall produce a
higher share for the LGU:

(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…including

relates surcharges, interests, or fines the government agency or
GOCC would paid if it were not otherwise exempt.

Section 292 of the LGC on the Allocation of Shares provides that:

(a) Where the natural resources are located in the province, the
allocation of shares shall be:
 Province: twenty percent (20%)
 Component City of Municipality: forty-five percent (45%)
 Barangay: thirty five percent (35%)

Where the natural resources are located in two or more provinces, or in

two or more component cities or municipalities or in two or more
barangays, their respective shares shall be computed on the basis of:

 Population – seventy percent (70%); and

 Land Area - thirty percent (30%)

Where the natural resources are located in a highly urbanized or

independent component city:

 City – sixty five percent (65%)

 Barangay - thirty five percent (35%).

VII. INTERNATIONAL CONCERNS

 The Philippines is not a party to any treaty that applies specifically

to the mining industry or an investment in the mining industry.30

30
Retrieved from: (http://www.syciplaw.com/Documents/M2014%20Philippines.pdf)
 However, the Philippines has entered into treaties and has enacted
laws which address collateral concerns such as:

A. Protection of Indigenous People

a. Article 2 of the International Labor Organization (ILO)

Convention 169 –

“1. Governments shall have the responsibility for developing,

with the participation of the peoples concerned, co-ordinated
and systematic action to protect the rights of these peoples
and to guarantee respect for their integrity.

2. Such action shall include measures for:

(a) ensuring that members of these peoples benefit on
an equal footing from the rights and opportunities
which national laws and regulations grant to other
members of the population;
(b) promoting the full realization of the social,
economic and cultural rights of these peoples with
respect for their social and cultural identity, their
customs and traditions and their institutions;
(c) assisting the members of the peoples concerned to
eliminate socio-economic gaps that may exist between
indigenous and other members of the national
community, in a manner compatible with their
aspirations and ways of life.”

b. International Covenant of Civil and Political Rights and

International Covenant of Economic, Social and Cultural
Rights – 1.2. “All peoples may, for their own ends, freely
dispose of their natural wealth and resources without prejudice
to any obligations arising out of international economic co-
operation, based upon the principle of mutual benefit, and
international law. In no case may a people be deprived of its
own means of subsistence.”
B. Taxation – Philippine Double Taxation Agreements that require
the Philippines to give up its right to tax non-residents on gains
from the sale of mining rights have been entered into with
different countries.

C. Environmental Protection:
 * Obligations under the Rio Declaration on Environment
and Development (“Rio Declaration”)31

The Rio Declaration entered into force on June 14, 1992, with
the primary goal of establishing a new and equitable global
partnership through the creation of new levels of cooperation
among States, key sectors of societies and people, and to work
towards international agreements which respect the interests of
all and protect the integrity of the global environmental and
developmental system. The Rio Declaration recognizes the fact
that States have the sovereign right to exploit their own natural
resources but must ensure that the activities within their
jurisdiction and control do not cause environmental damage to
other States.

Further, States must do their best to protect the environment by

enacting effective environmental laws and developing sound
national environmental policies.

The Rio Declaration is not a convention but States have treated

its provisions as generally accepted principles of international
law and continue to observe obligations therein.

In the Philippines, the Supreme Court has issued Administrative

Order No. 23-2008 which designated different court branches
all over the Philippines to handle environmental cases in the
interest of efficient administration of justice. As a development,
a remedy in the form of a Writ of Kalikasan is now available to
natural or juridical persons whose constitutional right to a
balanced and healthful ecology is violated or threatened by an
unlawful act or omission of a public official or employee or
even private individual which involves an environmental
damage of such magnitude as to prejudice the life, health, or
property of inhabitants in two or more cities or provinces.

31
The Rio Declaration on Environment and Development, often shortened to Rio
Declaration, was a short document produced at the 1992 United Nations "Conference on
Environment and Development" (UNCED), informally known as the Earth Summit, and
signed by over 170 countries.
VIII. FUTURE DIRECTIONS IN THE PHILIPPINE
MINING INDUSTRY
The following recommendations were taken from the Philippine
Development Plan for 2011-2016, published by the National Economic
Development Authority (NEDA).

Manage a more equitable utilization of mineral resources

a. Review and harmonize mining policies and other related policies
(e.g., IPRA, NIPAS, LGC, etc.);

b. Ensure the mining industry’s compliance with laws and policies

on conservation, protection and rehabilitation:

 Institute comprehensive resource valuation of mining operations

(including environmental and social costs);
 Safeguard the ecological and environmental integrity of areas
affected by mining operations;
 Strictly enforce compliance of mining companies within
environmental and social development commitment;
 Implement noncapital intensive and short-term remediation
measures; and
 Develop mine viability and environmental assessment
guidelines for the remediation/ rehabilitation or redevelopment
of viable projects.

c. Rationalize the extraction and use of minerals for national

development:

 Determine the actual minerals and metal needs of the country

that will contribute to the realization of industrialization;
 Promote the development of downstream industries to maximize
the benefits or value-added from mining;
 Rationalize resource assessment for both metallic and mineral
commodities; complete an accurate and realistic inventory of
actual mineral reserves, indicating specific locations, types and
values of the minerals to be potentially extracted;
 Strictly implement the “use-it-or-lose-it” policy to cleanse
inactive mining applications and nonperforming mining
contracts;
 Determine untapped offshore mineral resources by actively
pursuing characterization and assessment surveys; and
 Pursue new mining technology and research and development
of mining techniques in mining planning, scheduling, and
design to raise the level of mine productivity and make the local
mining industry globally competitive. This should be supported
by capability-building programs and the establishment of
laboratory facilities with state-of-the art equipment.

d. Guarantee the equitable distribution of benefits from minerals

through good governance in the mining sector:
  Protect public investments through government oversight over
mining companies to ensure transparency and accountability,
stimulating more investment as a result;
 Review, monitor and evaluate existing large-scale mining
contracts with respect to their compliance with existing rules
and regulations;
 Reaffirm ordinances and resolutions issued by LGUs to protect
their environment to the extent these are consistent with national
laws and policies;
 Sign on to the Extractive Industry Transparency Initiative (EITI)
in order to practice and implement transparency and
accountability among mining companies operating in the
country;
 Ensure the timely and accurate release of the legitimate share of
local governments in the extraction of national wealth;
 Improve the government share in taxes; and
 Rationalize the incentives granted by the government to mining
companies.

Legislative Agenda

Minerals Management Bill - This bill pushes for the conservation of

nonrenewable mineral resources for the benefit of both present and
future generations of Filipinos by adopting a sustainable, rational,
needsbased minerals management, geared towards effective utilization
of mineral resources for national industrialization and modernization of
agriculture.

Pending Legislative Measures

1. House Bill No. 206 – An Act to Regulate the Rational Exploration,

Development and Utilization of Mineral Resources, and to Ensure
the Equitable Sharing of Benefits For the State, Indigenous Peoples
and Local Communities, and For Other Purposes

Author: Lorenzo Tañada III

Filed: August 1, 2010, 15th Congress, 1st Regular Session
Status: Pending with the Committee on Natural Resources since
August 27, 2010.

The measure aims to supersede the Mining Act of 1995 and

institutionalize the following reforms:
  Guarantee that the exploration, development, and utilization of
mineral resources will primarily benefit all Filipinos, in line
with the principle of intergenerational responsibility;

 Prioritize more sustainable livelihood choices for communities;

 Recognize that the issue of environment is local and prioritize

local participation in decisions surrounding mining; and

 Protect human rights of communities and individuals and

impose harsh penalties for violations thereof, as well as
integrating features of the NIPAS on Free, Prior and Informed
Consent for mining activities conducted within the jurisdiction
of ancestral domains.

2. House Bill No. 4315 - An Act Re-Orienting The Philippine Mining

Industry, Ensuring The Highest Industry Development Standards,
And For Other Purposes

Author: Teddy A. Casiño

Filed: March 2,2011, 15th Congress, 1st Regular Session
Status: Pending with the Committee on Natural Resources since
March 9, 2011

 The proposed measure consolidates previous alternative policy

proposals which seek to reorient the Philippine mining industry
towards the judicious use of our mineral resources. The bill
addresses the need for an alternative framework for the mining
industry authored on the principles of social justice, respect for
all people’s rights and welfare, environmental conservation,
sustainable development, defense of national patrimony, and
national industrialization.

 The measure also provides that long-term mining development

shall be programmed by the State in accord with the country’s
availability of resources, technological capability and capacity,
and the protection of the rights of ICCs/IPs and Muslim
Filipinos.

3. House Bill No. 3763 – An Act to Regulate The Rational

Exploration, Development And Utilization Of Mineral Resources,
and To Ensure The Equitable Sharing of Benefits For The State,
 Indigenous Peoples And Local Communities, And For Other
Purposes

Author: Kaka J. Bag-Ao

Filed: December 1, 2010, 15th Congress, 1st Regular Session
Status: Pending with the Committee on Natural Resources since
December 7, 2010

 The measure is an offshoot of House Bill No. 206 filed by

Cong. Lorenzo Tañada III, reflecting basically the same State
policies in the former bill.

 The measure restricts the development, utilization, and

processing of mineral resources to Filipino citizens and
corporations only. The State shall directly undertake exploration
activities.

 In addition, re-mining and recycling of mineral resources shall

be prioritized over the opening of new mines.

Source: National Economic Development Authority’s Philippine

Development Plan 2011-2016