Wish list for the resources industryDocument Transcript
My New Year’s Wish List for the Resources IndustryWhile on holiday mode, I received from my editor, Simon Halley a friendlyreminder thru email instructing me to submit my article for the first issuefor 2012. Since the beginning of every new year is the time for best wishesand resolutions, I find it opportune to make my twelve (12) wishes for 2012for the Philippine resources industry.1. Congress does not pass a new mining law. The Philippine Mining Act of1995 went through a thorough vetting process. There were twoImplementing Rules and Regulations passed by the Department ofEnvironment and Natural Resources (“DENR”) the last one shepherded byone of the staunchest opponent of mining who used to be DENRUndersecretary and is now with the academe. Even the law’s provisions onFinancial and Technical Assistance Agreements (“FTAA”) allowing full foreignownership of mining projects were challenged in the Supreme Court by anti-mining lobbyist and environmental groups only to be declaredconstitutional. The law may have its flaws but to replace at this point issimilar to the adage “changing horses midstream”.2. An expeditious resolution on the legal standing of local government unitsto ban resources projects in their jurisdiction. Whether it is the courts orsome government agency that will make the final determination, thereshould be an early resolution of this issue, which is holding up a lot ofresources investments.3. At least one of the FTAA mining projects gets on stream. We are almostnearing two decades since the Philippine government awarded the first twoFTAAs in mid-1990s. Up to now there is still no certainty if the Didipio orthe Tampakan project will proceed because of local opposition and the lackof political will by the national government. The industry needs to showcasea large-scale, foreign-owned mining project to boost investments.4. The DENR and the Department of Energy (“DOE”) get their acts togetherin the administration of energy laws. The DOE has the mandate over energyresources but most of these projects are located in protected areas or areascovered by other land use agreements like mining or logging concessionsunder the jurisdiction of the DENR. The hapless contractor is thus left withan energy service contract but is prevented from accessing its area. The twoagencies should review procedures for permitting and consult privateindustry in setting up timeframes for obtaining licenses and permits. It hasbeen reported that the DOE and the DENR have executed an agreement tocreate a technical working group to address the challenges impeding coaldevelopment projects. This is a good start but I want to see if anythingconcrete will come out of this.5. The National Commission on Indigenous Peoples (“NCIP”) truly representsthe interests of indigenous cultural communities (“ICC”). Speaking of agovernment agency that needs to get its act together, the NCIP in myexperience as a lawyer in private practice and resource developer, is anenigma. With all due respect, I cannot fathom how rules and judgments arepromulgated. Nevertheless, I give the officials the benefit of the doubt; theNCIP is a relatively young administrative agency with enormous quasi-legislative and quasi-judicial powers. At the end of the day, the NCIP mustbe accountable only to the ICCs and not to any interest groups, politician orresource developer.6. Petroleum in commercial quantity is found in sedimentary basins otherthan Northwest Palawan. Experts are unanimous in saying that the
Philippines’ potential for oil and gas has not been really investigated despitethe fact that we have sedimentary basins located near petroleum richterritories of Indonesia, Malaysia and China. Most of the prospective sitesare located in NW Palawan. The upstream petroleum industry needs a shotin the arm. While the country can benefit from the United NationsConvention on the Law of the Sea (UNCLOS), which can increase the areasthat the Philippines can claim as its own for exploration by a factor oftwenty, the territorial dispute with China seems to have added politicaluncertainty to offshore exploration particularly in the South China Sea.Meanwhile, exploration in the Sulu Sea basin near Sabah has beendisappointing so far notwithstanding the massive risk capital poured byExxonMobil. And to further spur petroleum exploration, the governmentshould commence initiatives to revive the Trans-ASEAN Gas Pipeline project,which aims to connect the natural gas fields in the region to the majormarkets. With the proposed infrastructure, several marginal fields can beput on-stream if provisions for the pipeline as a “common carrier” can beincluded in the project package.7. Congress promulgates a new law that will set the parameters for “energyproject of national significance”. Energy projects are unduly delayedbecause of “non-aligned and non-harmonized laws” and legal roadblocksfrom local government units, indigenous people and some interest groupswhose opposition to these projects are often time based on misinformation.The DOE’s initiative in pushing for a law that will recognize projects ofnational significance announced by Secretary Jose Rene Almendras duringthe 2011 Energy Investment Forum is a welcome development as a numberof projects such as transmission lines and coal power plants cannot moveforward because of problems with local government units.8. Congress reviews existing energy exploration laws. The petroleum andcoal explorations laws were “martial law babies” enacted during the 1970s.To put an added impetus to high-risk and high-capital energy exploration,the government should revisit these laws and among others, provide moreincentives for deep-water petroleum exploration and mine mouth coal powerprojects.9. The government implements feed-in-tariffs (“FiT”) rates and guidelines forrenewable portfolio standards for renewable energy (“RE”). Investors arewaiting for these and unfortunately their patience doesn’t last forever. ThePhilippines passed its RE Law before Malaysia but it has startedimplementing FiT rates ahead of us. Whatever the outcome is, governmentshould implement the FiT rates and let RE investors decide if the rates areacceptable to them.10. The DOE spearhead in implementing a geothermal resource reportingcode and develop publicly available database. I cannot deny the fact that Iam very bullish on geothermal energy since the country obviously is blessedwith this RE resource. New geothermal exploration companies have heededthe call of government by taking up exploration acreage. In time thesecompanies will be culling investments locally through initial public offeringsor private equity placements. For the protection of the investing public,there is thus a need for a standardized reporting by these explorationcompanies similar to the Philippine Mineral Reporting Code. Protocols andtools for resource assessment will help also in developing technical expertise.11. Critical collaboration between civil society organizations and theresources industry. We cannot discount the role of civil society in theresources industry. In the RE industry, the WWF has initiated a programcalled the “Ring of Fire” to unleash the potential of geothermal energy in
Southeast Asia particularly in the Philippines and Indonesia. WWF hopesthe program will show it is possible to achieve the use of geothermal energyin a sustainable way, conserving biodiversity, and at the same time supportinnovation and green economic growth, counter climate change and improvethe living conditions of targeted communities. Now if only this can bereplicated in other resource industries.12. Public-private partnership in the field of research, development anddemonstration for new technologies in resource exploration. With theFilipinos propensity to easily adapt to new technologies, their good commandof the English language, and the enormous resources potential of thecountry, the Philippines can be a hub for the geoscientific research. Whatwe need is private investments in the establishment of research institutionsand more data acquisition stimulated by financial incentives by thegovernment and probably grants from development agencies.With that, I conclude by quoting a New Year aphorism by Bill Vaughan, anAmerican columnist and author: “An optimist stays up until midnight to seethe new year in. A pessimist stays up to make sure the old year leaves.”Dear readers, subscribers and advertisers of the Philippine Resources, Ifervently hope that as always, the resources industry will remain optimisticdespite all the challenges besetting it!Fernando “Ronnie” Penarroyo is the Managing Partner of Puno and PenarroyoLaw Offices (www.punopenalaw.com). He specializes in Energy and ResourcesLaw, Project Finance and Business Development.