Of Bangsamoro and other musings The Framework Agreement on the Bangsamoro (“Framework”) signed between the Republic of the Philippines and the Moro Islamic Liberation Front is a major milestone not just for the ongoing peace process and reconciliation in Mindanao, but also for the improvement of the economic conditions of the area. The signing of the Framework shall serve as an invitation for investors to take a second look at the potential wealth of Mindanao’s natural resources once the region is stabilized and ready for economic utilization. Peace and order will bring in the entry of investments in power generation, transmission lines, and mineral and energy exploration and development projects. The agreement consists of several subjects, which shall serve as the preparatory skeletal framework for the eventual creation of a new entity, the Bangsamoro. While the constitutionality of the Framework is presumed, it will be subject to future challenges on issues questioning its legality and validity. The negotiators share the belief that unlike the Memorandum of Agreement on the Ancestral Domain, the Philippine Government will not cede or surrender ownership and possession of certain territorial lands. The Framework discusses the governmental and administrative aspects to be delegated to the Bangsamoro, which will remain part of the Philippines where the Philippine government will continue to exercise its power, authority and sovereignty. Barring any potential legal obstacles, the Framework may yet be the single biggest achievement of the Aquino Administration that will spur long lasting stability and economic growth in Mindanao until such time that the Final Peace Agreement is signed. The Bangsamoro government shall be vested with exclusive powers to create its sources of wealth in the region. As succinctly provided in the Framework, “consistent with the Bangsamoro Basic Law, the Bangsamoro will have the power to create its own sources of revenues and to levy taxes, fees, and charges, subject to limitations as may be mutually agreed upon by the Parties. This power shall include the power to determine tax bases and tax rates, guided by the principles of devolution of power, equalization, equity, accountability, administrative simplicity, harmonization, economic efficiency, and fiscal autonomy.” The ability to create its own internal revenue code may prove to be both advantageous and disadvantageous. On one hand, the Bangsamoro legislative body can provide for less bureaucratic processes of implementing and paying tax schedules, entice investments by providing tax breaks and incentives as well as favorable tax treatments, prescribe tax rates, and provide for its own tariffs and customs code governing importation. On the other hand, the creation of a tax law may not be as efficient as anticipated if obstacles would come from the numerous vested and powerful interests that will represent the legislative body causing a stalemate over important provisions of the law. Needless to say, the implementation of the tax laws shall be left to the sole authority of the Bangsamoro, following the provisions of the Framework on the exclusive powers of the Bangsamoro government.
More importantly, the Bangsamoro government shall have just and equitable share in the revenue generated through the exploration, development, or utilization of natural resources obtaining in all the areas/territories of the Bangsamoro based on an agreement on the revenue and wealth sharing with the Philippine government. The Bangsamoro can enter into resources exploration contracts and control the flow of revenue through its different tax provisions as well as financial mechanisms while the Philippine government gets its share in the revenue income that the Bangsamoro will raise. Resource developers will then have to be guided as to what legal and regulatory framework will be followed on intended future investments in Bangsamoro. Should Imperial Manila continue to grant exploration permits, mining agreements, petroleum service contracts, coal operating agreements, renewable energy service contracts and other form of resources agreements over areas located in Bangsamoro under the fiscal regimes of energy presidential decrees, the Mining Act of 1995, the Renewable Energy Act of 2008, the Foreign Investments Act of 1991 and other related laws? And in relation thereto, can the Bangsamoro veto resources projects of national significance or interest? Is the Regalian Doctrine enshrined under the Philippine Constitution applicable to Bangsamoro? The Bangsamoro agreement will also have repercussions on the just recently concluded Philippine Energy Contracting Round (“PECR”) No. 4 for petroleum, which included among other areas, Area 12 – Cotabato Basin. Covering an onshore area of 456,000 hectares where around 820 line-‐km of 2D seismic has been acquired and five wells drilled, the Cotabato Basin has a mean total risked recoverable resource (excluding speculative unmapped resources) of ~ 71 MMbbl oil and 312 Bcf gas, according to the Department of Energy (“DOE”). About 1 billion cubic meter of natural gas in the Sultan-‐sa-‐Barongis structure is considered potential resources. Will the Bangsamoro honor the service contract of the winning bidder or proceed to look for another contractor? The same goes with the service contracts covering the Sulu Sea particularly areas in offshore Sulu and Sabah. Resource developers will be closely monitoring the preparatory work on the drafting of the annexes to the framework agreement and the law that will govern a new Bangsamoro region that will be drafted by a 15-‐man Transition Commission. * * * * * * * * Professor Marvic M.V.F. Leonen, former dean of the University of the Philippines College of Law and noted indigenous peoples rights and anti-‐mining advocate may be appointed Justice of the Supreme Court by President Benigno Aquino as a reward for negotiating the Bangsamoro agreement. It should be remembered that Dean Leonen represented the petitioners in the La Bugal-‐BLaan Tribal Association vs. Ramos (01 December 2004), which questioned the constitutionality of the Philippine Mining Act of 1995 and argued for an
intervenor in the case of Cruz vs. Sec. of Environment and Natural Resources (06 December 2000), which questioned the constitutionality of IPRA. If appointed, Prof. Leonen will join another colleague from UP Law, Chief Justice Lourdes Aranal-‐Sereno. CJ Sereno by the way, co-‐authored in 1983 with now IBP President Roan Libarios, an article published in the Philippine Law Journal entitled “The Interface Between National Land Law and Kalinga Land Law” recommending recognition of ancestral land rights, protection of indigenous system of land ownership, and promotion of the indigenous mode of settling land dispute. IPRA was upheld on a technicality resulting from a 7-‐7 deadlock vote among the SC justices so if ever the law is challenged again, we have CJ Sereno and a possible J Leonen in the bench. * * * * * * * * The 2013 national and local elections are upon us and mining is expected to become a hot election issue. In South Cotabato candidates are being measured according to where they stand on the $5.9 billion stalled Tampakan copper-‐and-‐gold mining project by Xstrata Plcs Philippine-‐unit, Sagittarius Mines, Inc. where candidates have been branded as either anti or pro mining, which could affect the way they handle their campaigns. In Nueva Vizcaya on the other hand, environmentalists are not comfortable over some politicians’ apparent campaign platforms riding on the anti-‐mining sentiment in the province as a move to win votes in next year’s elections. In the meantime President Benigno Aquino said he wants to wait for the passage of a mining taxation reform law before approving the Tampakan mining project. Sagittarius has asked Aquino to reverse the Department of Environment and Natural Resources decision not to issue an environmental compliance certificate for the project. In Leyte, the much-‐anticipated political showdown between the Romualdez and Petilla families in Leyte is not going to happen as Chamber of Mines President, Benjamin Philip G. Romualdez will not be throwing his hat to the gubernatorial race against Leopoldo Dominico L. Petilla. In response, incumbent Leyte Governor Carlos Jericho L. Petilla dropped his plan to challenge Ferdinand Martin G. Romualdez to represent the first district. Gov. Petilla is being groomed instead to be the next DOE Secretary replacing Sec. Rene Almendras who is reportedly heading off to Malacanang to be designated as head of the Presidential Management Staff. The good news is that Mr. Romualdez will still be available to lead the local mining industry, which he described in the recent mining conference as “at a crossroads”. Secretary Almendras’ promotion will also help the energy industry as it has somebody to push the paper works in the Palace when energy issues are under deliberation. His push is also needed to coordinate the often times dysfunctional relationship between the energy and environment departments. * * * * * * * * The DOE has concluded the bidding round for petroleum exploration under PECR 4 in July but no service contract has been awarded to the winning bidders yet. It seems that the initial expectation of a warm reception from the
international petroleum industry on the bidding round did not materialize, as the big boys prefer to remain in the sideline. Despite numerous roadshows conducted in Australia, Singapore, and Italy, no bids came from the major petroleum exploration firms. The reason could be the still unresolved territorial dispute with China over portions of the West Philippine Sea where the main petroleum prospects are located. * * * * * * * * Kudos to the quiet and diligent work and collaboration done by a team which includes scientists and legal experts from my alma mater, the University of the Philippines (“UP”) through the National Institute of Geological Sciences and the Institute of International Legal Studies of the UP College of Law. The team was responsible for the recognition of Philippine jurisdiction over the Benham Rise Region, which is the Philippines first successful validation of a claim in accord with the 1982 Law of the Sea Convention. It is the first major expansion of the Philippines maritime boundaries since the late 1970s when it declared its exclusive economic zone. The DOE is set to conduct seismic surveys to determine the oil and gas potential of Benham Rise, with the possibility of including the area in the next contracting round for petroleum exploration in PECR 5. The Benham Rise is believed to be rich in natural gas and manganese nodules and is reportedly being eyed by a number of interested bidders. * * * * * * * * President Benigno Aquino III capped his recent state visit to New Zealand by witnessing the signing of a bilateral agreement entered into by Philippine Foreign Affairs Secretary Albert Del Rosario and New Zealand Minister of Foreign Affairs Murray McCully meant to provide a government-‐to-‐government framework to support geothermal development between the two countries. The agreement aims to build more competence for human resources at the DOE through scholarships and development of opportunities not just for investment but also for transfer of technology. Foreign Minister McCully believes that both countries are well placed to develop business opportunities around the world, including in Indonesia and South America. Fernando “Ronnie” Penarroyo is the Managing Partner of Puno and Penarroyo Law Offices (firstname.lastname@example.org). He specializes in Energy, Resources and Environmental Law, Business Development and Project Finance. He is a trustee of the International Geothermal Association, the National Geothermal Association of the Philippines and the Philippine Mineral Exploration Association.