December 16, 2008

AN ACT PROMOTING THE DEVELOPMENT, UTILIZATION AND COMMERCIALIZATION OF RENEWABLE ENERGY RESOURCES AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representative of the Philippines in Congress assembled:

CHAPTER I TITLE AND DECLARATION OF POLICIES

SECTION 1. Short Title. — This Act shall be known as the "Renewable Energy Act of 2008". It shall hereinafter be referred to as the "Act".

SEC. 2. Declaration of Policies. — It is hereby declared the policy of the State to:

1. Accelerate the exploration and development of renewable energy resources such as, but not limited to, biomass, solar, wind, hydro, geothermal and ocean energy sources, including hybrid systems, to achieve energy self-reliance, through the adoption of sustainable energy development strategies to reduce the country's dependence on fossil fuels and thereby minimize the country's exposure to price fluctuations in the international markets, the effects of which spiral down to almost all sectors of the economy;

2. Increase the utilization of renewable energy by institutionalizing the development of national and local capabilities in the use of renewable energy systems, and promoting its efficient and cost-effective commercial application by providing fiscal and nonfiscal incentives;

3. Encourage the development and utilization of renewable energy resources as tools to effectively prevent or reduce harmful emissions and thereby balance the goals of economic growth and development with the protection of health and the environment; and

4. Establish the necessary infrastructure and mechanism to carry out the mandates specified in this Act and other existing laws.

SEC. 3. Scope. — This Act shall establish the framework for the accelerated development and advancement of renewable energy resources, and the development of a strategic program to increase its utilization.

SEC. 4. Definition of Terms. — As used in this Act, the following terms are herein defined.

(a) "Biomass energy systems" refers to energy systems which use biomass resources to produce heat, stream, mechanical power or electricity through either thermochemical, biochemical or physico-chemical processes, or through such other technologies which shall comply with prescribed environmental standards pursuant to this Act.

(b) "Biomass resources" refers to non-fossilized biodegradable organic material originating from naturally occurring or cultured plants, animals and microorganisms, including agricultural products, by-products and residues such as, but not limited to, biofuels except corn, soya beans and rice but including sugarcane and coconut, rice hulls, rice straws, coconut husks and shells, corn cobs, corn stovers, bagasse, biodegradable organic fractions of industrial and municipal wastes that can be used in bioconversion process and other processes, as well as gases and liquids recovered from the decomposition and/or extraction of non-fossilized and biodegradable organic materials.

(c) "Board of Investments (BOI)" refers to an attached agency of the Department of Trade and Industry created under Republic Act No. 5186, as amended.

(d) "Co-generation system" refers to facilities which produce electrical and/or mechanical energy and forms of useful thermal energy such as heat or stream which are used for industrial, commercial heating or cooling purposes through the sequential use of energy.

(e) "Department of Energy (DOE)" refers to the government agency created pursuant to Republic Act No. 7638 whose functions are expanded in Republic Act No. 9136 and further expanded in this Act.

(f) "Department of Environment and Natural Resources (DENR)" refers to the government agency created pursuant to Executive Order No. 192.

(g) "Department of Finance (DOF)" refers to the government agency created pursuant to Executive Order No. 127, as amended.

(h) "Department of Science and Technology (DOST)" refers to the government agency created pursuant to Executive Order No. 128.

(i) "Department of trade and Industry (DTI)" refers to the government agency created pursuant to Executive Order No. 133.

(j) "Distributed generation" refers to a system of small generation entities supplying directly to the distribution grid, any one of which shall not exceed one hundred kilowatts (100 kW) in capacity.

(k) "Distribution of Electricity" refers to the conveyance of electricity of a Distribution through its distribution system pursuant to the provision of Republic Act No. 9136.

(l) "Distribution Utility (DU)" refers to any electric cooperative, private corporation, government-owned utility or existing local government unit which has an exclusive franchise to operate a distribution system in accordance with its franchise and Republic Act No. 9136.

(m) "Electric Power Industry Reform Act of 2001" or Republic Act No. 9136 refers to the law mandating the restructuring of the electric power sector and the privatization of the National Power Corporation (NPC).

(n) "Energy Regulatory Commission (ERC)" refers to the independent quasi-judicial regulatory agency created pursuant to Republic Act No. 9136.

(o) "Generation Company" refers to any person or entity authorized by the ERC to operate facilities used in the generation of electricity.

(p) "Generation Facility" refers to a facility for the production of electricity and/or thermal energy such as, but not limited to, steam, hot or cold water.

(q) "Geothermal energy" as used herein and in the context of this Act, shall be considered renewable and the provisions of this Act is therefore applicable thereto if geothermal energy, as a mineral resource, is produced through; (1) natural recharge, where the water is replenished by rainfall and the heat is continuously produced inside the earth; and/or (2) enhanced recharge, where hot water used in the geothermal process is re-injected into the ground to produce more steam as well as to provide additional recharge to the convection system.

(r) "Geothermal Energy Systems" refers to machines or other equipment that converts geothermal energy into useful power.

(s) "Geothermal Resources" refers to mineral resources, classified as renewable energy resource, in the form of: (i) all products of geothermal processes, embracing indigenous steam, hot water, and hot brines; (ii) steam and other fluids artificially introduced into geothermal formations; (iii) heat or associated energy found in geothermal formations; and (iv) any by-product derived from them.

(t) "Government Share" refers to the amount due the National Government and local government units from the exploitation, development, and utilization of naturally-occurring renewable energy resources such as geothermal, wind, solar, ocean and hydro excluding biomass.

(u) "Green Energy Option" refers to the mechanism to empower end-users to choose renewable energy in meeting their energy requirements.

(v) "Grid" refers to the high voltage backbone system of interconnected transmission lines, substations, and related facilities, located in each of Luzon, Visayas, and Mindanao, or as may otherwise be determined by the ERC in accordance with Republic Act No. 9136.

(w) "Hybrid Systems" refers to any power or energy generation facility which makes use of two (2) or more types of technologies utilizing both conventional and/or renewable fuel sources, such as, but not limited to, integrated solar/wind systems, biomass/fossil fuel systems, hydro/fossil fuel systems, integrated solar/biomass systems, integrated wind/fossil fuel systems, with a minimum of ten (10) megawatts or ten percent (10%) of the annual energy output provided by the Renewable Energy (RE) component.

(x) "Hydroelectric Power Systems" or "Hydropower Systems" refers to water-based energy systems which produce electricity by utilizing the kinetic energy of falling or running water to turn a turbine generator.

(y) "Hydroelectric Power Development" or Hydropower Development" refers to the construction and installation of a hydroelectric power-generating plant and its auxiliary facilities, such as diversion structure, headrace, penstock, substation, transmission, and machine shop, among others.

(z) "Hydroelectric Power Resources" or "Hydropower Resources" refers to water resources found technically feasible for development of hydropower projects which include rivers, lakes, waterfalls, irrigation canals, springs, ponds, and other water bodies.

(aa) "Local government share" refers to the amount due the local government units from the exploitation, development and utilization of naturally-occurring renewable energy resources.

(bb) "Micro-scale Project" refers to an RE project with capacity not exceeding one hundred kilowatts (100 kW).

(cc) "Missionary Electrification" refers to the provision of basic electricity service in unviable areas with the aim of bringing the operations in these areas to viability levels.

(dd) "National government share" refers to the amount due the national government from the exploitation, development and utilization of naturally-occurring renewable energy resources.

(ee) "National Power Corporation (NPC)" refers to the government corporation created under Republic Act No. 6395, as amended by Republic Act No. 9136.

(ff) "National Transmission Corporation (TRANSCO)" refers to the corporation created pursuant to Republic Act No. 9136 responsible for the planning, construction, and centralized operation and maintenance of high voltage transmission facilities, including grid interconnection and ancillary services.

(gg) "Net-Metering" refers to a system, appropriate for distributed generation, in which a distribution grid user has a two-way connection to the grid and is only charged for his net electricity consumption and is credited for any overall contribution to the electricity grid.

(hh) "Non-power application" refers to renewable energy systems or facilities that produce mechanical energy, combustible products such as methane gas, or forms of useful thermal energy such as heat or steam, that are not used for electricity generation, but for applications such as, but not limited to, industrial/commercial cooling, and fuel for cooking and transport.

(ii) "Ocean Energy Systems" refers to energy systems which convert ocean or tidal current, ocean thermal gradient or wave energy into electrical or mechanical energy.

(jj) "Off-Grid Systems" refers to electrical systems not connected to the wires and related facilities of the On-Grid Systems of the Philippines.

(kk) "On-Grid System" refers to electrical systems composed of interconnected transmission lines, distribution lines, substations, and related facilities for the purpose of conveyance of bulk power on the grid of the Philippines.

(ll) "Philippine Electricity Market Corporation (PEMC)" refers to the Corporation incorporated upon the initiative of the DOE composed of all Wholesale Electricity Spot Market (WESM) Members and whose Board of Directors will be the PEMC Board.

(mm) "Philippine National Oil Company (PNOC)" refers to the government agency created pursuant to Presidential Decree No. 334, as amended.

(nn) "Power application" refers to renewable energy systems or facilities that produce electricity.

(oo) "Registered RE Developer" refers to RE Developer duly registered with the DOE.

(pp) "Renewable Energy (systems) Developers" or"RE Developers" refers to individual/s or a group of individuals formed in accordance with existing Philippine Laws engaged in the exploration, development and utilization of RE resources and actual operation of RE systems/facilities.

(qq) "Renewable Energy Market (REM)" refers to the market where the trading of the RE certificates equivalent to an amount of power generated from RE resources is made.

(rr) "Renewable Energy Policy Framework (REPF)" refers to the long-term policy developed by the DOE which identifies among others, the goals and targets for the development and utilization of renewable energy in the country.

(ss) "Renewable Portfolio Standards (RPS)" refer to a market-based policy that requires electricity suppliers to source an agreed portion of their energy supply from eligible RE resources.

(tt) "Renewable Energy Service (Operating) Contract (REContract)" refers to the service agreement between the Government, through the DOE, and RE Developer over a period in which the RE Developer has the exclusive right to a particular RE area for exploration and development. The RE Contract shall be divided into two (2) stages: the pre-development stage and the development/commercial stage. The preliminary assessment and feasibility study up to financial closing shall refer to the pre-development stage. The construction and installation of facilities up to operation phase shall refer to the development stage.

(uu) "Renewable Energy Resources (RE Resources)" refers to energy resources that do not have an upper limit on the total quantity to be used. Such resources are renewable on a regular basis, and whose renewal rate is relatively rapid to consider availability over an indefinite period of time. These include, among others, biomass, solar, wind, geothermal, ocean energy, and hydropower conforming with internationally accepted norms and standards on dams, and other emerging renewable energy technologies.

(vv) "Renewable Energy Systems (RE Systems)" refers to energy systems which convert RE resources into useful energy forms, like electrical, mechanical, etc.

(ww) "Rural Electrification" refers to the delivery of basic electricity services, consisting of power generation, sub-transmission, and/or extension of associated power delivery system that would bring about important social and economic benefits to the countryside.

(xx) "Solar Energy" refers to the energy derived from solar radiation that can be converted into useful thermal or electrical energy.

(yy) "Solar Energy Systems" refers to energy systems which convert solar energy into thermal or electrical energy.

(zz) "Small Power Utilities Group (SPUG)" refers to the functional unit of the NPC mandated under Republic Act No. 9136 to pursue missionary electrification function.

(aaa) "Supplier" refer to any person or entity authorized by the ERC to sell, broker, market or aggregate electricity to the end-users.

(bbb) "Transmission of Electricity" refers to the conveyance of electric power through transmission lines as defined under Republic Act No. 9136 by TRANSCO or its buyer/concessionaire in accordance with its franchise and Republic Act No. 9136.

(ccc) "Wind Energy" refers to the energy that can be derived from wind that is converted into useful electrical or mechanical energy.

(ddd) "Wind Energy Systems" refers to the machines or other related equipment that convert wind energy into useful electrical or mechanical energy.

(eee) "Wholesale Electricity Spot Market (WESM)" refers to the wholesale electricity spot market created pursuant to Republic Act No. 9136.

CHAPTER II ORGANIZATION

SEC. 5. Lead Agency. — The DOE shall be the lead agency mandated to implement the provisions of this Act.

CHAPTER III ON-GRID RENEWABLE ENERGY DEVELOPMENT

SEC. 6. Renewable Portfolio Standard (RPS). — All stakeholders in the electric power industry shall contribute to the growth of the renewable energy industry of the country. Towards this end, the National Renewable Energy Board (NREB), created under Section 27 of this Act, shall set the minimum percentage of generation from eligible renewable energy resources and determine to which sector RPS shall be imposed on a per grid basis within one (1) year from the effectivity of this Act.

SEC. 7. Feed-In Tariff System. To accelerate the development of emerging renewable energy resources, a feed-in tariff system for electricity produced from wind, solar, ocean, run-of-river hydropower and biomass is hereby mandated. Towards this end, the ERC in consultation with the National Renewable Energy Board (NREB) created under SECtion 27 of this Act shall formulate and promulgate feed-in tariff system rules within one (1) year upon the effectivity of this Act which shall include, but not limited to, the following:

1. Priority connections to the grid for electricity generated from emerging renewable energy resources such as wind, solar, ocean, run-of-river hydropower and biomass power plants within the territory of the Philippines;

2. The priority purchase and transmission of, and payment for, such electricity by the grid system operators;

3. Determine the fixed tariff to be paid to electricity produced from each type of emerging renewable energy and the mandated number of years for the application of these rates, which shall not be less than twelve (12) years;

4. The feed-in tariff to be set shall be applied to the emerging renewable energy to be used in compliance with the renewable portfolio standard as provided for in this Act and in accordance with the RPS rules that will be established by the DOE.

SEC. 8. Renewable Energy Market (REM). — To facilitate compliance with Section 6 of this Act, the DOE shall establish the REM and shall direct PEMC to implement changes to the WESM Rules in order to incorporate the rules specific to the operation of the REM under the WESM.

The PEMC shall, under the supervision of the DOE, establish a Renewable Energy Registrar within one (1) year from the effectivity of this Act and shall issue, keep and verify RE Certificates corresponding to energy generated from eligible RE facilities. Such certificates will be used for compliance with the RPS. For this purpose, a transaction fee, equal to half of what PEMC currently charges regular WESM players, may be imposed by PEMC.

SEC. 9. Green Energy Option. — The DOE shall establish a Green Energy Option program which provides end-users the option to choose RE resources as their sources of energy. In consultation with the NREB, the DOE shall promulgate the appropriate implementing rules and regulations which are necessary, incidental or convenient to achieve the objectives set forth herein.

Upon the determination of the DOE of its technical viability and consistent with the requirements of the green energy option program, end-users may directly contract from RE facilities their energy requirements distributed through their respective distribution utilities.

Consistent herewith, TRANSCO or its successors-in-interest, DUs, PEMC and all relevant parties are hereby mandated to provide the mechanisms for the physical connection and commercial arrangements necessary to ensure the success of the Green Energy Option. The end-user who will enroll under the energy option program should be informed by way of its monthly electric bill, how much of its monthly energy consumption and generation charge is provided by RE facilities.

SEC. 10. Net-metering for Renewable Energy. — Subject to technical consideration and without discrimination and upon request by distribution end-users, the distribution utilities shall enter into net-metering agreements with qualified end-users who will be installing the RE system.

The ERC, in consultation with the NREB and the electric power industry participants, shall establish net-metering interconnection standards and pricing methodology and other commercial arrangements necessary to ensure success of the net-metering for renewable energy program within one (1) year upon the effectivity of this Act.

The distribution utility shall be entitled to any Renewable Energy Certificate resulting from net-metering arrangement with the qualified end-user who is using an RE resource to provide energy and the distribution utility shall be able to use this RE certificate in compliance with its obligations under RPS.

The DOE, ERC, TRANSCO or its successors-in-interest, DUs, PEMC and all relevant parties are hereby mandated to provide the mechanisms for the physical connection and commercial arrangements necessary to ensure the success of the Net-metering for Renewable Energy program, consistent with the Grid and Distribution Codes.

SEC. 11. Transmission and Distribution System Development. — TRANSCO or its successors-in-interest or its buyer/concessionaire and all DUs, shall include the required connection facilities for RE-based power facilities in the Transmission and Distribution Development Plans: Provided, That such facilities are approved by the DOE. The connection facilities of RE power plants, including lines, shall be subject only to ancillary service covering such connections.

CHAPTER IV OFF-GRID RENEWABLE ENERGY DEVELOPMENT

SEC. 12. Off-Grid Areas. — Within one (1) year from the effectivity of this Act, NPC-SPUG or its successors-in-interest and/or qualified third parties in off-grid areas shall, in the performance of its mandate to provide missionary electrification, source a minimum percentage of its total annual generation upon recommendation of the NREB from available RE resources in the area concerned, as may be determined by the DOE.

As used in this Act, successors-in-interest refer to entities deemed technically and financially capable to serve/take over existing NPC-SPUG areas.

Eligible RE generation in off-grid and missionary areas shall be eligible for the provision of RE Certificates defined in Section 8 of this Act. In the event there are no viable RE resources in the off-grid and missionary areas, the relevant electricity supplier in the off-grid and missionary areas shall still be obligated under Section 6 of this Act.

CHAPTER V GOVERNMENT SHARE

SEC. 13. Government Share. — The government share on existing and new RE development projects shall be equal to one percent (1%) of the gross income of RE resource developers resulting from the sale of renewable energy produced and such other income incidental to and arising from the renewable energy generation, transmission, and sale of electric power except for indigenous geothermal energy, which shall be at one and a half percent (1.5%) of gross income.

To further promote the development of RE projects, the government hereby waives its share from the proceeds of micro-scale projects for communal purposes and non-commercial operations, which are not greater than one hundred kilowatts (100 kW).

CHAPTER VI ENVIRONMENTAL COMPLIANCE

SEC. 14. Compliance with Environmental Regulations. — All RE explorations, development, utilization, and RE systems operations shall be conducted in accordance with existing environmental regulations as prescribed by the DENR and/or any other concerned government agency.

CHAPTER VII GENERAL INCENTIVES

SEC. 15. Incentives for Renewable Energy Projects and Activities. — RE Developers of renewable energy facilities, including hybrid systems, in proportion to and to the extent of the RE component, for both power and non-power applications, as duly certified by the DOE, in consultation with the BOI, shall be entitled to the following incentives:

(a) Income Tax Holiday (ITH) — For the first seven (7) years of its commercial operations, the duly registered RE developer shall be exempt from income taxes levied by the National Government.

Additional investments in the project shall be entitled to additional income tax exemption on the income attributable to the investment: Provided, That the discovery and development of new RE resource shall be treated as a new investment and shall therefore be entitled to a fresh package of incentives: Provided, further, That the entitlement period for additional investments shall not be more than three (3) times the period of the initial availment of the ITH.

(b) Duty-free Importation of RE Machinery, Equipment and Materials — Within the first ten (10) years upon the issuance of a certification of an RE developer, the importation of machinery and equipment, and materials and parts thereof, including control and communication equipment, shall not be subject to tariff duties: Provided, however, That the said machinery, equipment, materials and parts are directly and actually needed and used exclusively in the RE facilities for transformation into energy and delivery of energy to the point of use and covered by shipping documents in the name of the duly registered operator to whom the shipment will be directly delivered by customs authorities: Provided, further, That endorsement of the DOE is obtained before the importation of such machinery, equipment, materials and parts is made.

Endorsement of the DOE must be secured before any sale, transfer or disposition of the imported capital equipment, machinery or spare parts is made: Provided, That if such sale, transfer or disposition is made within the ten (10)-year period from the date of importation, any of the following conditions must be present:

1. If made to another RE developer enjoying tax and duty exemption on imported capital equipment;

2. If made to a non-RE developer, upon payment of any taxes and duties due on the net book value of the capital equipment to be sold;

3. Exportation of the used capital equipment, machinery, spare parts or source documents or those required for RE development; and

4. For reasons of proven technical obsolescence.

When the aforementioned sale, transfer or disposition is made under any of the conditions provided for in the foregoing paragraphs after ten (10) years from the date of importation, the sale, transfer or disposition shall no longer be subject to the payment of taxes and duties.

1. Special Realty Tax Rates on Equipment and Machinery — Any law to the contrary notwithstanding, realty and other taxes on civil works, equipment, machinery, and other improvements of a registered RE Developer actually and exclusively used for RE facilities shall not exceed one and a half percent (1.5%) of their original cost less accumulated normal depreciation or net book value: Provided, That in case of an integrated resource development and generation facility as provided under Republic Act No. 9136, the real property tax shall only be imposed on the power plant.

2. Net Operating Loss Carry-Over (NOLCO) — The NOLCO of the RE Developer during the first three (3) years from the start of commercial operation which had not been previously offset as deduction from gross income shall be carried over as a deduction from gross income for the next seven (7) consecutive taxable years immediately following the year of such loss: Provided, however, That operating loss resulting from the availment of incentives provided for in this Act shall not be entitled to NOLCO.

3. Corporate Tax Rate — After seven (7) years of ITH, all RE Developers shall pay a corporate tax of ten percent (10%) on its net taxable income as defined in the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 9337: Provided, That the RE Developer shall pass on the savings to the end-users in the form of lower power rates.

4. Accelerated Depreciation — If, and only if, an RE project fails to receive an ITH before full operation, it may apply for Accelerated Depreciation in its tax books and be taxed based on such: Provided, That if it applies for Accelerated Depreciation, the project or its expansions shall no longer be eligible for an ITH. Accelerated depreciation of plant, machinery, and equipment that are reasonably needed and actually used for the exploration, development and utilization of RE resources may be depreciated using a rate not exceeding twice the rate which would have been used had the annual allowance been computed in accordance with the rules and regulations prescribed by the Secretary of the Department of Finance and the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended. Any of the following methods of accelerated depreciation may be adopted:

1. Declining balance method; and

2. Sum-of-the years digit method.

5. Zero Percent Value-Added Tax Rate — The sale of fuel or power generated from renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy and other emerging energy sources using technologies such as fuel cells and hydrogen fuels, shall be subject to zero percent (0%) value-added tax (VAT), pursuant to the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 9337.
   All RE Developers shall be entitled to zero-rated value added tax on its purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities.
   This provision shall also apply to the whole process of exploring and developing renewable energy sources up to its conversion into power, including, but not limited to, the services performed by subcontractors and/or contractors.

6. Cash Incentive of Renewable Energy Developers for Missionary Electrification — A RE developer to a cash generation-based incentive per kilowatt-hour rate generated, equivalent to fifty percent (50%) of the universal charge for power needed to service missionary areas where it operates the same, to be chargeable against the universal charge for missionary electrification.

7. Tax Exemption of Carbon Credits — All proceeds from the sale of carbon emission credits shall be exempt from any and all taxes.

8. Tax Credit on Domestic Capital Equipment and Services — A tax credit equivalent to one hundred percent (100%) of the value of the value-added tax and custom duties that would have been paid on the RE machinery, equipment, materials and parts had these items been imported shall be given to an RE operating contract holder who purchases machinery, equipment, materials, and parts from a domestic manufacturer for purposes set forth in this Act: Provided, That prior approval by the DOE was obtained by the local manufacturer: Provided, further, That the acquisition of such machinery, equipment, materials, and parts shall be made within the validity of the RE operating contract.

SEC. 16. Environmental Compliance Certificate (ECC). — Notwithstanding Section 17 (b)()(iii) of Republic Act No. 7160, it would be sufficient for the renewable energy developer to secure the Environmental Compliance Certificate (ECC) from the corresponding regional office of the DENR.

SEC. 17. Exemption from the Universal Charge. — Power and electricity generated through the RES for the generator's own consumption and/or for free distribution in the off-grid areas shall be exempted from the payment of the universal charge provided for under Section 34 of Republic Act No. 9136.

SEC. 18. Payment of Transmission Charges. — A registered renewable energy developer producing power and electricity from an intermittent RE resource may opt to pay the transmission and wheeling charges of TRANSCO or its successors-in-interest on a per kilowatt-hour basis at a cost equivalent to the average per kilowatt-hour basis at a cost equivalent to the average per kilowatt-hour rate of all other electricity transmitted through the grid.

SEC. 19. Hybrid and Cogeneration Systems. — The tax exemptions and/or incentives provided for in Section 15 of this Act shall be availed of by registered RE Developer of hybrid and cogeneration systems utilizing both RE sources and conventional energy: Provided, however, That the tax exemptions and incentives shall apply only to the equipment, machinery and/or devices utilizing RE resources.

SEC. 20. Intermittent RE Resources. — TRANSCO or its successors-in-interest, in consultation with stakeholders, shall determine the maximum penetration limit of the Intermittent RE-based power plants to the Grid, through technical and economic analysis. Qualified and registered RE generating units with intermittent RE resources shall be considered "must dispatch" based on available energy and shall enjoy the benefit of priority dispatch. All provisions under the WESM Rules, Distribution and Grid Codes which do not allow "must dispatch" status for intermittent RE resources shall be deemed amended or modified. The PEMC and TRANSCO or its successors-in-interest shall implement technical mitigation and improvements in the system in order to ensure safety and reliability of electricity transmission.

As used in this Act, RE generating unit with intermittent RE resources refers to a RE generating unit or group of units connected to a common connection point whose RE resource is location-specific, naturally difficult to precisely predict the availability of RE resource thereby making the energy generated variable, unpredictable and irregular and the availability of the resource inherently uncontrollable, which include plants utilizing wind, solar, run-of-river hydro or ocean energy.

SEC. 21. Incentives for RE Commercialization. — All manufacturers, fabricators and suppliers of locally-produced RE equipment and components duly recognized and accredited by the DOE, in consultation with the DOST, the DOF and the DTI, shall, upon registration with the BOI, be entitled to the privileges set forth under this section.

Consistent with Article 7, item (20) of Executive Order No. 226, the registration with the BOI, as provided for in Section 15 and Section 21 of this Act, shall be carried out through an agreement and an administrative arrangement between the BOI and the DOE, with the end-view of facilitating the registration of qualified RE facilities based on the implementing rules and regulations that will be developed by the DOE. It is further mandated that the applications for registration will be positively acted upon by the BOI on the basis of the accreditation issued by the DOE.

The Renewable Energy Sector is hereby declared a priority investment sector that will regularly form part of the country's Investment Priority Plan, unless declared otherwise by law. As such, all entities duly accredited by the DOE under this Act shall be entitled to all the incentives provided herein.

1. Tax and Duty-free Importation of Components, Parts and Materials — All shipments necessary for the manufacture and/or fabrication of RE equipment and components shall be exempted from importation and duties and value-added tax (VAT): Provided, however, That the said components, parts and materials are: (i) not manufactured domestically in reasonable quantity at competitive prices; (ii) directly and actually needed and shall be used exclusively in the manufacture/fabrication of RE equipment; and (iii) covered by shipping documents in the name of the duly registered manufacturer/fabricator to whom the shipment will be directly delivered by customs authorities: Provided, further, That prior approval of the DOE was obtained before the importation of such components, parts and materials.

2. Tax Credit in Domestic Capital Components, Parts and Materials — A tax credit equivalent to one hundred percent (100%) of the amount of the value-added tax (VAT) and custom duties that would have been paid on the components, parts and materials had these items been imported shall be given to an RE equipment manufacturer, fabricator, and supplier duly recognized and accredited by the DOE who purchases RE component, parts and materials from a domestic manufacturer: Provided, That such components, and parts are directly needed and shall be used exclusively by the RE manufacturer, fabricator and supplier for the manufacture, fabrication and sale of the RE equipment: Provided, further, That prior approval by the DOE was obtained by the local manufacturer.

3. Income Tax Holiday and Exemption — For seven (7) years starting from the date of recognition/accreditation, an RE manufacturer, fabricator and supplier of RE equipment shall be fully exempt from income taxes levied by the National Government on net income derived only from the sale of RE equipment, machinery, parts and services.

4. Zero-rated Value-Added Tax Transactions — All manufacturers, fabricators and suppliers of locally produced renewable energy equipment shall be subject to zero-rated value-added tax on its transactions with local suppliers of goods, properties and services.

SEC. 22. Incentives for Farmers Engaged in the Plantation of Biomass Resources. — For a period of ten (10) years after the effectivity of this Act, all individuals and entities engaged in the plantation of crops and trees used as biomass resources such as, but not limited to, jatropha, coconut, and sugarcane, as certified by the Department of Energy, shall be entitled to duty-free importation and be exempted from value-added tax (VAT) on all types of agricultural inputs, equipment and machinery such as, but not limited to, fertilizer, insecticide, pesticide, tractor, trailers, trucks, farm implements and machinery, harvesters, threshers, hybrid seeds, genetic materials, sprayers, packaging machinery and materials, bulkhandling facilities, such as conveyors and mini-loaders, weighing scales, harvesting equipment, and spare parts of all agricultural equipment.

SEC. 23. Tax Rebate for Purchase of RE Components. — To encourage the adoption of RE technologies, the DOF, in consultation with the DOST, the DOE, and the DTI, shall provide rebates for all or part of the tax paid for the purchase of RE equipment for residential, industrial, or community use. The DOF shall also prescribe the appropriate period for granting the tax rebates.

SEC. 24. Period of Grant of Fiscal Incentives. — The fiscal incentives granted under Section 15 of this Act shall apply to all RE capacities upon the effectivity of this Act. The NREB, in coordination with the DOE, shall submit a yearly report on the implementation of this Act to the Philippine Congress, through the Joint Congressional Power Commission, every January of each year following the period in review, indicating among others, the progress of RE development in the country and the benefits and impact generated by the development and utilization of its renewable energy resources in the context of its energy security and climate change imperatives. This shall serve as basis for the Joint Congressional Power Commission's review of the incentives as provided for in this Act towards ensuring the full development of the country' s RE capacities under a rationalized market and incentives scheme.

SEC. 25. Registration of RE Developers and Local Manufacturers, Fabricators and Suppliers of Locally-Produced Renewable Energy Equipment. — RE Developers and local manufacturers, fabricators and suppliers of locally-produced renewable energy equipment shall register with the DOE, through the Renewable Energy Management Bureau. Upon registration, a certification shall be issued to each RE Developer and local manufacturer, fabricator and supplier of locally-produced renewable energy equipment to serve as the basis of their entitlement to incentives provided under Chapter VII of this Act.

SEC. 26. Certification from the Department of Energy (DOE). — All certifications required to qualify RE developers to avail of the incentives provided for under this Act shall be issued by the DOE through the Renewable Energy Management Bureau.

The DOE, through the Renewable Energy Management Bureau shall issue said certification fifteen (15) days upon request of the renewable energy developer or manufacturer, fabricator or supplier: Provided, That the certification issued by the DOE shall be without prejudice to any further requirements that may be imposed by the concerned agencies of the government charged with the administration of the fiscal incentives abovementioned.

CHAPTER VIII GENERAL PROVISIONS

SEC. 27. Creation of the National Renewable Energy Board (NREB). — The NREB is hereby created. It shall be composed of a Chairman and one (1) representative each from the following agencies: DOE, DTI, DOF, DENR, NPC, TRANSCO or its successors-in-interest, PNOC and PEMC who shall be designated by their respective secretaries on a permanent basis; and one (1) representative each from the following sectors; Re Developers, Government Financial Institutions (GFIs), private distribution utilities, electric cooperatives, electricity suppliers and nongovernmental organizations, duly endorsed by their respective industry associations and all to be appointed by the President of the Republic of the Philippines.

The Chairman shall, within one (1) month from the effectivity of this Act, convene the NREB.

The NREB shall be assisted by a Technical Secretariat from the Renewable Energy Management Bureau of the DOE, created under Section 32 hereof, and shall directly report to the Office of the Secretary or the Undersecretary of the Department, as the case may be, on matters pertaining to the activities of the NREB. The number of staff of the Technical Secretariat and the creation of corresponding positions necessary to complement and/or augment the existing plantilla of the Renewable Energy Management Bureau shall be determined by the Board, subject to approval by the Department of Budget and Management (DBM) and to existing civil service rules and regulations.

The NREB shall have the following powers and functions:

1. Evaluate and recommend to the DOE the mandated RPS and minimum RE generation capacities in off-grid areas, as it deems appropriate;

2. Recommend specific actions to facilitate the implementation of the National Renewable Energy Program (NREP) to be executed by the DOE and other appropriate agencies of government and to ensure that there shall be no overlapping and redundant functions within the national government departments and agencies concerned;

3. Monitor and review the implementation of the NREP, including compliance with the RPS and minimum RE generation capacities in off-grid areas;

4. Oversee and monitor the utilization of the Renewable Energy Trust Fund created pursuant to Section 28 of this Act and administered by the DOE; and

5. Perform such other functions, as may be necessary, to attain the objectives of this Act.

SEC. 28. Renewable Energy Trust Fund (RETF). — A Renewable Energy Trust Fund is hereby established to enhance the development and greater utilization of renewable energy. It shall be administered by the DOE as a special account in any of the GFIs. The RETF shall be exclusively used to:

1. Finance the research, development, demonstration, and promotion of the widespread and productive use of RE systems for power and non-power applications, as well as to provide funding for research and development institutions engaged in renewable energy studies undertaken jointly through public-private sector partnership, including provision for scholarship and fellowship for energy studies;

2. Support the development and operation of new RE resources to improve their competitiveness in the market: Provided, That the grant thereof shall be done through a competitive and transparent manner;

3. Conduct nationwide resource and market assessment studies for the power and non-power applications of renewable energy systems;

4. Propagate RE knowledge by accrediting, tapping, training, and providing benefits to institutions, entities and organizations which can extend the promotion and dissemination of RE benefits to the national and local levels; and

5. Fund such other activities necessary or incidental to the attainment of the objectives of this Act.
   
   Use of the fund may be through grants, loans, equity investments, loan guarantees, insurance, counterpart fund or such other financial arrangements necessary for the attainment of the objectives of this Act: Provided, That the use or allocation thereof shall, as far as practicable, be done through a competitive and transparent manner.
   The RETF shall be funded from:

1. Proceeds from the emission fees collected from all generating facilities consistent with Republic Act No. 8749 or the Philippine Clean Air Act;

2. One and a half percent (1.5%) of the net annual income of the Philippine Charity Sweepstakes Office;

3. One and a half percent (1.5%) of the net annual income of the Philippine Amusement and Gaming Corporation;

4. One and a half percent (1.5%) of the net annual dividends remitted to the National Treasury of the Philippine National Oil Company and its subsidiaries;

5. Contributions, grants and donations: Provided, That all contributions, grants and donations made to the RETF shall be tax deductible subject to the provisions of the National Internal Revenue Code. Towards this end, the Bureau of Internal Revenue (BIR) shall assist the DOE in formulating the rules and regulations to implement this provision;

6. One and a half percent (1.5%) of the proceeds of the Government share collected from the development and use of indigenous non-renewable energy resources;

7. Any revenue generated from the utilization of the RETF; and

8. Proceeds from the fines and penalties imposed under this Act.

SEC. 29. Financial Assistance Program. — Government financial institutions such as the Development Bank of the Philippines (DBP), Land Bank of the Philippines (LBP), Phil-Exim Bank and other government financial institutions shall, in accordance with and to the extent allowed by the enabling provisions of their respective charters or applicable laws, provide preferential financial packages for the development, utilization and commercialization of RE projects as duly recommended and endorsed by the DOE.

SEC. 30. Adoption of Waste-To-Energy Technologies. — The DOE shall, where practicable, encourage the adoption of waste-to-energy facilities such as, but not limited to, biogas systems. The DOE shall, in coordination with the DENR, ensure compliance with this provision.

As used in this Act, waste-to-energy technologies shall refer to systems which convert biodegradable materials such as, but not limited to, animal manure or agricultural waste, into useful energy through processes such as anaerobic digestion, fermentation and gasification, among others, subject to the provisions and intent of Republic Act No. 8749 (Clean Air Act of 1999) and Republic Act No. 9003 (Ecological Solid Waste Management Act of 2000).

SEC. 31. Incentives for RE Host Communities/LGUs. — Eighty percent (80%) of the share from royalty and/or government share of RE host communities/LGUs from RE projects and activities shall be used directly to subsidize the electricity consumption of end-users in the RE host communities/LGUs whose monthly consumption do not exceed one hundred kilowatt hours (100 kWh). The subsidy may be in the form of rebates, refunds and/or any other form as may be determined by the DOE, the DOF and the ERC, in coordination with the NREB.

The DOE, the DOF and the ERC, in coordination with the NREB and in consultation with the distribution utilities, shall promulgate the mechanisms to implement this provision within six (6) months from the effectivity of this Act.

SEC. 32. Creation of the Renewable Energy Management Bureau. — For the purpose of implementing the provisions of this Act, a Renewable Energy Management Bureau (REMB) under the DOE is hereby established, and the existing Renewable Energy Management Division of the Energy Utilization Management Bureau of the DOE, whose plantilla shall form the nucleus of REMB, is hereby dissolved. The organizational structure and staffing complement of the REMB shall be determined by the Secretary of the DOE, in consultation with the DBM, in accordance with existing civil service rules and regulations. The budgetary requirements necessary for the creation of the REMB shall be taken from the current appropriations of the DOE, Thereafter, the funding for the REMB shall be included in the annual General Appropriations Act.

The REMB shall have the following powers and functions:

1. Implement policies, plans and programs related to the accelerated development, transformation, utilization and commercialization of renewable energy resources and technologies;

2. Develop and maintain a centralized, comprehensive and unified data and information base on renewable energy resources to ensure the efficient evaluation, analysis, and dissemination of data and information on renewable energy resources, development, utilization, demand and technology application;

3. Promote the commercialization/application of renewable energy resources including new and emerging technologies for efficient and economical transformation, conversion, processing, marketing and distribution to end users;

4. Conduct technical research, socioeconomic and environmental impact studies of renewable energy projects for the development of sustainable renewable energy systems;

5. Supervise and monitor activities of government and private companies and entities on renewable energy resources development and utilization to ensure compliance with existing rules, regulations, guidelines and standards;

6. Provide information, consultation and technical training and advisory services to developers, practitioners and entities involved in renewable energy technology and develop renewable energy technology and develop renewable energy technology development strategies; and

7. Perform other functions that may be necessary for the effective implementation of this Act and the accelerated development and utilization of the renewable energy resources in the country.

CHAPTER IX FINAL PROVISIONS

SEC. 33. Implementing Rules and Regulations (IRR). — Within six (6) months from the effectivity of this Act, the DOE shall, in consultation with the Senate and House of Representatives Committees on Energy, relevant government agencies and RE stakeholders, promulgate the IRR of this Act.

SEC. 34. Congressional Oversight. — Upon effectivity of this Act, the Joint Congressional Power Commission created under Section 62 of Republic Act No. 9136. otherwise known as the "Electric Power Industry Reform Act of 2001" shall exercise oversight power over the implementation of this Act.

SEC. 35. Prohibited Acts. — The following acts shall be prohibited:

1. Noncompliance or violation of the RPS rules;

2. Willful refusal to undertake net metering arrangements with qualified distribution grid users;

3. Falsification or tampering of public documents or officials records to avail of the fiscal and non-fiscal incentives provided under this Act;

4. Failure and willful refusal to issue the single certificate referred to in Section 26 of this Act; and

5. Noncompliance with the established guidelines that the DOE will adopt for the implementation of this Act.

SEC. 36. Penalty Clause. — Any person who willfully commits any of the prohibited acts enumerated under this Act, shall be imposed with the penalties provided herein. Any person, who willfully aids or abets the commission of a crime prohibited herein or who causes the commission of any such act by another, shall be liable in the same manner as the principal.

In the case of associations, partnership or corporations, the penalty shall be imposed on the partner, president, chief operating officer, chief executive officer, directors or officers responsible for the violation.

The commission of any prohibited acts provided for under Section 35, upon conviction thereof, shall suffer the penalty of imprisonment of one (1) year to five (5) years, or a fine ranging from a minimum of One hundred thousand pesos (P100,000.00) to One hundred million pesos (P100,000,000.00), or twice the amount of damages caused or costs avoided for noncompliance, whichever is higher, or both, upon the discretion of the court.

The DOE is further empowered to impose administrative fines and penalties for any violation of the provisions of this Act, its IRR and other issuances relative to this Act.

This is without prejudice to the penalties provided for under existing environmental regulations prescribed by the DENR and/or any other concerned government agency.

SEC. 37. Appropriations. — Such sums as may be necessary for the initial implementation of this Act shall be taken from the current appropriations of the DOE. Thereafter, the fund necessary to carry out the provisions of this Act shall be included in the annual General Appropriations Act.

SEC. 38. Separability Clause. — If any provision of this Act is held invalid or unconstitutional, the remainder of the of the Act or the provision not otherwise affected shall remain valid and subsisting.

SEC. 39. Repealing Clause. Any law, presidential decree or issuance, executive order, letter of instruction, administrative rule or regulation contrary to or inconsistent with the provisions of this Act is hereby repealed, modified or amended accordingly.

Consistent with the foregoing paragraph and Section 13 of this Act, Section 1 of Presidential Decree No. 1442 or the Geothermal Resources Exploration and Development Act, insofar as the exploration of geothermal resources by the government, and Section 10(1) of Republic Act No. 7156, otherwise known as the "Mini-Hydro Electric Power Incentive Act", insofar as the special privilege tax rate of two percent (2%) are hereby repealed, modified or amended accordingly.

SEC. 40. Effectivity Clause. — This Act shall take effect fifteen (15) days after its publication in at least two (2) newspapers of general circulation.

January 12, 2007

AN ACT TO DIRECT THE USE OF BIOFUELS, ESTABLISHING FOR THIS PURPOSE THE BIOFUEL PROGRAM, APPROPRIATING FUNDS THEREFOR, AND FOR OTHER PURPOSES.

• See IRR here

• See Guidelines Governing the Biofuel Feedstocks Production, and Biofuels and Biofuel Blends Production, Distribution and Sale here

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title - This act shall be known as the "Biofuels Act of 2006".

SEC. 2. Declaration Policy - It is hereby declared the policy of the State to reduce dependence on imported fuels with due regard to the protection of public health, the environment, and the natural ecosystems consistent with the country's sustainable economic growth that would expand opportunities for livelihood by mandating the use of biofuels as a measure to:

a) Develop and utilize indigenous renewable and sustainable-sources clean energy sources to reduce dependence on imported oil.

b) Mitigate toxic and greenhouse gas (GSG) emissions;

c) increase rural employment and income; and

d) Ensure the availability of alternative and renewable clean energy without any detriment to the natural ecosystem, biodiversity and food reserves of the country.

SEC. 3. Definition of terms - As used in this act, the following term shall be taken to means as follows:

a) AFTA - shall refer to the ASIAN free trade agreement initiated by the Association of South East Asian Nation;

b) Alternative Fuel Vehicle/Engine - shall refer to vehicle/engines that use alternative fuels such as biodiesel, bioethanel, natural gas, electricity, hydrogen and automotive LPG instead of gasoline and diesel;

c) Bioethanol fuel - shall refer to ethanol (C2H30H) produce from feedback and other biomass.

d) Biodiesel - shall refer to Fatty Acid Methyl Ester (FAME) or mono-alkyl ester delivered from vegetable oil, or animal fats and other biomass-derived oils that shall be technically proven and approved by the DOE for use in diesel engines, with quality specifications in accordance with the Philippine National Standards (PNS)

e) Bioethanol fuels - shall refer to the hydrous and anhydrous bioethanol suitably denatured for use as motor fuel with quality specifications in accordance with the PNS;

f) Biofuel - shall refer to the bioethanol and biodiesel and other fuels made from biomass and primary used for motive, thermal power generation, with quality specifications in accordance with PNS;

g) Biomass - shall refer to any organic matter, particularly cellulosic or ligno-cellulosic matter, which is available on a renewable or recurring basis, including trees, crops and associated residues, plant fiber, poultry litter and other animal wastes, industrial wastes and biodegradable component of solid waste;

h) DA - shall refer to the Department of Agriculture created under Executive Order No. 116, as amended;

i) Diesel - shall refer to the refined petroleum distillate, which may contain small amount of hydrocarbon or nonhydrocarbon additives to improve ignition quality or other characteristic, suitable for compression ignition engine and other suitable types of engines with quality specifications in accordance with PNS;

j) DENR - shall refer to the Department of Environment and Natural Resources created under Executive No. 192, as amended;

k) DOE - shall refer to the Department of Energy created under Republic Act No. 7638, as amended;

l) DOLE - shall refer to the Department of Labor and Employment created under Executive Order No. 126, as amended;

m) DOF - shall refer to the Department of Finance created under Administrative Orders No. 127 and 127-A;

n) DOST - shall refer to the Department of Science and Technology created under Republic Act no. 2067

o) DOTC - shall refer to the Department of Transportation and Communication created under Executive Order No. 125-A, as amended;

p) DTI - shall refer to the Department of Trade and Industry created under Executive Order No. 133;

q) Feedstock - shall refer to the organic sources such as molasses, sugarcane, cassava, coconut, jatropha, sweet sorghum or other biomass used in the production of biofuels;

r) Gasoline – shall refer to volatile mixture of liquid hydrocarbon, generally containing small amounts of additives suitable for use as fuel in spark-ignition internal combustion engines with quality specifications in accordance with the PNS;

s) Motor fuel - shall refer to all volatile and inflammable liquids and gas produced, blended or compounded for the purpose of, or which are suitable or practicable for, operating motor vehicle;

t) MTBE - shall refer to Methyl Tertiary Butyl Ether;

u) NBB or Board - shall refer to the National Biofuel Board created under Section 8 of this Act ;

v) Oil Company - shall refer to any entity that distributes and sells petroleum fuel products;

w) Oxygenate - shall refer to substances, which, when added to gasoline, increase the amount of oxygen in that gasoline blend;

x) PNS – shall refer to the Philippine National Standard; consistent with section 26 of R.A. No. 8749 otherwise known as the 'Philippine Clean Air Act of 1999;

y) Renewable Energy Sources - shall refer to energy sources that do not have an upper limit on the total quantity to be used. Such resources are renewable on a regular basis; and

z) WTO - shall refer to the World Trade Organization.

SEC. 4. Phasing Out of the Use of Harmful Gasoline Additives and/or Oxygenates. – Within six months from affectivity of this Act, the DOE, according to duly accepted international standards, shall gradually phase out the use of harmful gasoline additives such as, but not limited to MTBE

SEC. 5. Mandatory Use of Biofuels. – Pursuant to the above policy, it is hereby mandated that all liquid fuels for motors and engines sold in the Philippines shall contain locally-sourced biofuels components as follows:

5.1 Within two years from the effectivity of this Act, at least five percent (5%) bioethanol shall comprise the annual total volume of gasoline fuel actually sold and distributed by each and every oil company in the country; subject to requirement that all bioethanol blended gasoline shall contain a minimum of five percent (5%) bioethanol fuel by volume Provided, that ethanol blend conforms to PNS.

5.2 Within four years from the effectivity of this Act, the NBB created under this Act is empowered to determine the feasibility thereafter recommend to DOE to mandate a minimum of ten percent(10%) blend of bioethanol by volume into all gasoline fuel distributed and sold by each and every oil company in the country.

In the event of supply shortage of locally-produced bioethanol during the four–year period, oil companies shall be allowed to import bioethanol but only to the extent of the shortage as may be determined by NBB.

5.3 Within three months from the effectivity of this Act, a minimum of one percent (1%) biodiesel by volume shall be blended into all diesel engine fuels sold in the country: Provided That the biodiesel blend conforms to PNS for biodiesel.

Within two years from the effectivity of this Act, the NBB created under this Act is empowered to determine the feasibility and thereafter recommend to DOE to mandate a minimum of two percent (2%) blend of biodiesel by volume which may be increased taking into account considerations including but not limited to domestic supply and availability of locally-sourced biodiesel component.

SEC. 6. Incentive Scheme – To encourage investments in the production, distribution and use of locally-produced biofuels at and above the minimum mandated blends, and without prejudice to enjoying applicable incentives and benefits under existing laws, rules and regulations, the following additional incentives are hereby provided under this Act.

a) Specific tax

The specific tax on local or imported biofuels component, per liter of volume shall be zero (0). The gasoline and diesel fuel component, shall remain subject to the prevailing specific tax rate.

b) Value Added Tax

The sale of raw material used in the production of biofuels such as, but not limited to, coconut, jatropha, sugarcane, cassava, corn, and sweet sorghum shall be exempt from the value added tax.

c) Water Effluents

All water effluents, such as but not limited to distillery slops from the production of biofuels used as liquid fertilizer and for other agricultural purposes are considered "reuse", and are therefore, exempt from wastewater charges under the system provided under section 13 of R.A No. 9275, also known as the Philippine Clean Water Act: Provided, however, That such application shall be in accordance with the guidelines issued pursuant to R.A. No. 9275, subject to the monitoring and evaluation by DENR and approved by DA.

d) Financial Assistance

Government financial institutions, such as the Development Bank of the Philippines, Land Bank of the Philippines, Quedancor and other government institutions providing financial services shall, in accordance with and to the extent by the enabling provisions of their respective charters or applicable laws, accord high priority to extend financing to Filipino citizens or entities, at least sixty percent (60%) of the capital stock of which belongs to citizens of the Philippines that shall engage in activities involving production storage, handling and transport of biofuel feedstock, including the blending of biofuels with petroleum, as certified by the DOE.

SEC. 7. Powers and Functions of the DOE. – In addition to its existing powers and functions, the DOE is hereby mandated to take appropriate and necessary actions to implement the provisions of this Act. In pursuance thereof, it shall within three months from effectivity of this Act:

a) Formulate the implementing rules and regulations under Section 15 of this Act;

b) Prepare the Philippines Biofuel program consistent with the Philippine Energy Plan and taking into consideration the DOE's existing biofuels program;

c) Establish technical fuel quality standards for biofuels and biofuel-blended gasoline and diesel which comply with the PNS.

d) Establish guidelines for the transport, storage and handling of biofuels;

e) Impose fines and penalties against persons or entities found to have committed any of the prohibited acts under Section 12 (b) to (e) of this Act;

f) Stop the sale of biofuels and biofuel-blended gasoline and diesel that are not in conformity with the specifications provided for under Section 5 of this Act, the PNS and corresponding issuances of the Department; and

g) Conduct an information campaign to promote the use of biofuels

SEC. 8. Creation of the National Biofuel Board (NBB) – The National Biofuel Board is hereby created. It shall be composed of the Secretary of the DOE as chairman and the Secretaries of the DTI, DOST, DA, DOF, DOLE, and the Administrators of the PCA, and the SRA, as members.

The DOE Secretary, in his capacity as Chairperson, shall, within one month from the effectivity of this Act, convene the NBB.

The Board shall by assisted by a Technical Secretariat attached to the Office of the Secretary of the DOE. It shall be headed by a Director to be appointed by the Board. The number of staff of the Technical Secretariat and the corresponding positions shall be determined by the Board, subject to approval by the Department of Budget and Management (DBM) and existing civil services rules and regulations.

SEC. 9. Powers and Functions of the NBB. – The NBB shall have the following powers and functions:

a) Monitor the implementation of, and evaluate for further expansion, the National Biofuel Program (NBP) prepares by the DOE pursuant to Section 7 (b) of this Act;

b) Monitor the supply and utilization of biofuels and biofuel-blends and recommend appropriate measures in cases of shortage of feedstock supply for approval of the Secretary of DOE. For this purpose:

1. The NBB is empowered to require all entities engaged in the production, blending and distribution of biofuels to submit reports of their actual and projected sales and inventory of biofuels, in a format to be prescribed for this purpose; and

2. The NBB shall determine availability of locally-sourced biofuels and recommend to DOE the appropriate level or percentage of locally–sourced biofuels to the total annual volume of gasoline and diesel sold and distributed in the country.

c) Review and recommend to DOE the adjustment in the minimum mandated biofuel blends subject to the availability of locally–sourced biofuels: Provided, That the minimum blend may be decreased only within the first four years from the effectivity of this Act. Thereafter, the minimum blends of the five percent (5%) and two percent (2%) for bioethanol and biodiesel respectively, shall not be decreased;

d) Recommend to DOE a program that will ensure the availability of alternative fuel technology for vehicles, engine and parts in consonance with the mandated minimum biofuel-blends, and to maximize the utilization of biofuels including other biofuels;

e) Recommend to DOE the use of biofuel–blends in air transport taking into account safety and technical viability; and

f) Recommend specific actions to be executed by the DOE and other appropriate government agencies concerning the implementation of the NBP, including its economic, technical, environment, and social impact.

SEC. 10. Security of Domestic Sugar Supply. - Any provision of this Act to the contrary notwithstanding, the SRA, pursuant to its mandate, shall, at all times, ensures that the supply of sugar is sufficient to meet the domestic demand and that the price of sugar is stable.

To this end, the SRA shall recommend and the proper agencies shall undertake the importation of sugar whenever necessary and shall make appropriate adjustments to the minimum access volume parameters for sugar in the Tariff and Custom Code.

SEC. 11. Role of Government Agencies. – To ensure the effective implementation of the NBP, concerned agencies shall perform the following functions:

a) The DOF shall monitor the production and importation of biofuels through the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC);

b) The DOST and the DA shall coordinate in identifying and developing viable feedstock for the production of biofuels;

c) The DOST, through the Philippine Council for Industry and Energy Research and Development (PCIERD), shall develop and implement a research and development program supporting a sustainable improvement in biofuel production and utilization technology. It shall also publish and promote related technologies developed locally and abroad.

d) The DA through its relevant agencies shall:

(1) Within three months from effectivity of this Act, develop a national program for the production of crops for use as feedstock supply. For this purpose, the Administrators of the SRA and the PCA, and other DA-attached agencies shall, within their authority develop and implement policies supporting the Philippine Biofuel Program and submit the same to the Secretary of the DA for consideration;

(2) Ensure increased productivity and sustainable supply of biofuel feedstocks. It shall institutes program that would guarantee that a sufficient and reliable supply of feedstocks is allocated for biofuel production; and

(3) Publish information on available and suitable areas for cultivation and production of such crops.

e) The DOLE shall:

(1) Promote gainful livelihood opportunities and facilitate productive employment through effective employment services and regulation;

(2) Ensure the access of workers to productive resources and social coverage; and

(3) Recommend plans, policies and programs that will enhance the social impact of the NBP.

f) The Tariff Commission, in coordination with the appropriate government agencies, shall create and classify a tariff line for biofuels and biofuel-blends in consideration of WTO and AFTA agreements; and

g) The local government units (LGU) shall assist the DOE in monitoring the distribution sale in use of biofuels and biofuel-blends

SEC. 12. Prohibited Acts. The following acts shall be prohibited:

a) Diversion of biofuels, whether locally produced or imported, to purposes other than those envisioned in this Act;

b) Sale of biofuel–blended gasoline or diesel that fails to comply with the minimum biofuel–blend by volume in violation of the requirement under Section 5 of this Act;

c) Distribution, sale and use of automotive fuel containing harmful additives such as, but not limited to, MTBE at such concentration exceeding the limits to be determined by the NBB.

d) Noncompliance with the established guidelines of the PNS and DOE adopted for the implementation of this Act; and

e) False labeling of gasoline, diesel, biofuels and biofuel-blended gasoline and diesel.

SEC. 13. Penal Provisions. - Any person, who willfully aids or abets in the commission of a crime prohibited herein or who causes the commission of any such act by another shall be liable in the same manner as the principal.

In the case of association, partnerships or corporations, the penalty shall be imposed on the partner, president, chief operating officer, chief executive officer, directors or officers, responsible for the violation.

The commission of an act enumerated in Section 12, upon conviction thereof, shall suffer the penalty of one year to five years imprisonment and a fine ranging from a minimum of One million pesos (P 1,000,000.00) to Five million pesos (P 5,000,000.00).

In addition, the DOE shall confiscate any amount of such products that fail to comply with the requirements of Sections 4 & 5 of this Act, and implementing issuance of the DOE. The DOE shall determine the appropriate process and the manner of disposal and utilization of the confiscated products. The DOE is also empowered to stop and suspend the operation of businesses for refusal to comply with any order or instruction of the DOE Secretary in the exercise of his functions under this Act.

Further, the DOE is empowered to impose administrative fines and penalties for any violation of the provisions of this Act, implementing rules and regulations and other issuance relative to this Act.

SEC. 14. Appropriations. - Such sums as may be necessary for the initial implementation of this Act shall be taken from the current appropriations of the DOE. Thereafter, the fund necessary to carry out provisions of this Act shall be included in the annual General Appropriation Act.

SEC. 15. Implementing Rules and Regulations (IRR). - The DOE, in consultation with the NBB, the stakeholders and the other agencies concerned, shall within three months from affectivity of this Act, promulgated the IRR of this Act: Provided, That prior to its effectively, the draft of the IRR shall be posted at the DOE web site for at least one month, and shall be published in at least two newspapers of general circulation.

SEC. 16. Congressional Oversight Committee. - Upon affectivity of this act, a Congressional Committee, hereinafter referred to as the Biofuels Oversight Committee, is hereby constituted. The biofuels oversight committee shall be compose of (14) members, with the Chairmen of the Committees on Energy of both House of Congress as co-chairmen. The Chairmen of the Committee on Agriculture and Trade and Industry shall be ex officio members. An additional four members from each House, to be designated by the Senate President and Speaker of the House of Representatives, respectively. The minority shall be entitled to pro-rata representation but shall have at least one representative in the Biofuel Oversight Committee.

SEC. 17. Benefits of Biofuel Workers. - This Act shall not in any way result in the forfeiture or diminution of existing benefits enjoyed by the sugar workers as prescribed under the R.A. No. 6982, or the Sugar Amelioration Act of 1991. In case sugarcane shall be used as feedstock.

The NBB shall establish a mechanism similar to that provided under the Sugar Amelioration Act of 1991 for the benefit of other biofuel workers.

SEC. 18. Special Clause. - This act shall not be interpreted as prejudicial to clean development mechanism (CDM) projects that cause carbon dioxide (CO2) and greenhouse gasses (GHG) emission reductions by means of biofuel use.

SEC. 19. Repealing Clause. - The provision of Section 148 (d) of R.A. No. 8424, otherwise known as Tax Reform Act. of 1997, and all other laws, presidential decrees or issuance, executive orders, presidential proclamations. rules and regulations or part thereof inconsistent with the provisions of this Act, are hereby repealed, modified or amended accordingly.

SEC. 20. Separability Clause. - If any provision of this Act is declared unconstitutional in the same shall not affect the validity and effectivity of the other provision hereof.

SEC. 21. Effectivity. - This act shall effect fifteen (15) day after publication in at least two newspapers of general circulation.

AN ACT ORDAINING REFORMS IN THE ELECTRIC POWER INDUSTRY,

AMENDING FOR THE PURPOSE CERTAIN LAWS AND FOR OTHER PURPOSES

• See IRR here

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Electric Power Industry Reform Act of 2001". It shall hereinafter be referred to as the Act.

Section 2. Declaration of Policy. - It is hereby declared the policy of the State:

(a) To ensure and accelerate the total electrification of the country;

(b) To ensure the quality, reliability, security and affordability of the supply of electric power;

(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair competition and full public accountability to achieve greater operational and economic efficiency and enhance the competitiveness of Philippine products in the global market;

(d) To enhance the inflow of private capital and broaden the ownership base of the power generation, transmission and distribution sectors in order to minimize the financial risk exposure of the national government;

(e) To ensure fair and non-discriminatory treatment of public and private sector entities in the process of restructuring the electric power industry;

(f) To protect the public interest as it is affected by the rates and services of electric utilities and other providers of electric power;

(g) To assure socially and environmentally compatible energy sources and infrastructure;

(h) To promote the utilization of indigenous and new and renewable energy resources in power generation in order to reduce dependence on imported energy;

(i) To provide for an orderly and transparent privatization of the assets and liabilities of the National Power Corporation (NPC).

(j) To establish a strong and purely independent regulatory body and system to ensure consumer protection and enhance the competitive operation of the electricity market; and

(k) To encourage the efficient use of energy and other modalities of demand side management.

Section 3. Scope. - This Act shall provide a framework for the restructuring of the electric power industry, including the privatization of the assets of NPC, the transition to the desired competitive structure, and the definition of the responsibilities of the various government agencies and private entities.

Section 4. Definition of Terms. -

(a) "Aggregator" refers to a person or entity, engaged in consolidating electric power demand of end-users in the contestable market, for the purpose of purchasing and reselling electricity on a group basis;

(b) "Ancillary Services" refer to those services that are necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the transmission system in accordance with good utility practice and the Grid Code to be adopted in accordance with this Act;

(c) "Captive market" refers to electricity end-users who do not have the choice of a supplier of electricity, as may be determined by the Energy Regulatory Commission (ERC) in accordance with this Act;

(d) "Central Dispatch" refers to the process of scheduling and issuing direct instructions by the grid operator to achieve the economic operation and maintenance of quality, stability, reliability and security of the transmission system;

(e) "Co-generation Facility" refers to a facility which produces electrical and/or mechanical energy and forms of useful thermal energy such as heat or steam which are used for industrial commercial heating or cooling purposes through the sequential use of energy

(f) "Commission" refers to the decision-making body of the ERC composed of a Chairman and four (4) members as provided under Section 38 hereof;

(g) "Concession Contract" refers to the award by the government to a qualified private entity of the responsibility for financing, operating, expanding, maintaining and managing specific Government-owned assets;

(h) "Contestable Market" refers to the electricity end-users who have a choice of a supplier of electricity, as may be determined by the ERC in accordance with this Act;

(i) "Department of Energy" or "DOE" refers to the government agency created pursuant to Republic Act No. 7638 whose expanded functions are provided herein;

(j) "Department of Finance" or "DOF" refers to the government agency created pursuant to Executive Order No. 127;

(k) "Distribution Code" refers to a compilation of rules and regulations governing electric utilities in the operation and maintenance of their distribution systems which includes, among others, the standards for service and performance, and defines and establishes the relationship of the distribution systems with the facilities or installations of the parties connected thereto;

(l) "Distribution of Electricity" refers to the conveyance of electric power by a distribution utility through its distribution system pursuant to the provisions of this Act;

(m) "Distribution System" refers to the system of wires and associated facilities belonging to a franchised distribution utility extending between the delivery points on the transmission or subtransmission system or generator connection and the point of connection to the premises of the end-user;

(n) "Distribution Retail Wheeling Charge" refers to the cost or charge regulated by the ERC for the use of a distribution system and/or the availment of related services;

(o) "Distribution Retail Supply Rate" refers to the total price paid by end-users consisting of the charges for generation, transmission and related ancillary services, distribution, supply and other related charges for electric service;

(p) "Distribution Utility" refers to any electric cooperative, private corporation, government-owned utility or existing local government unit which has an exclusive franchise to operate a distribution system in accordance with this Act;

(q) "Electric Cooperative" refers to a distribution utility organized pursuant to Presidential Decree No. 269, as amended, or as otherwise provided in this Act;

(r) "Electric Power Industry Participant" refers to any person or entity engaged in the generation, transmission, distribution or supply of electricity;

(s) "End-user" refers to any person or entity requiring the supply and delivery of electricity for its own use;

(t) "Energy Regulatory Board" or "ERB" refers to the independent, quasi-judicial regulatory body created under Executive Order No. 172, as amended;

(u) "Energy Regulatory Commission" or "ERC" refers to the regulatory agency created herein;

(v) "Franchise Area" refers to a geographical area exclusively assigned or granted to a distribution utility for distribution of electricity;

(w) "Generation Company" refers to any person or entity authorized by the ERC to operate facilities used in the generation of electricity;

(x) "Generation of Electricity" refers to the production of electricity by a generation company or a co-generation facility pursuant to the provisions of this Act;

(y) "Grid" refers to the high voltage backbone system of interconnected transmission lines, substations and related facilities;

(z) "Grid Code" refers to the set of rules and regulations governing the safe and reliable operation, maintenance and development of the high voltage backbone transmission system and its related facilities;

(aa) "Implementing Rules and Regulations" or "IRR" refers to the implementing rules and regulations consistent with this Act promulgated by the DOE in consultation with the electric power industry participants and representatives of the business sector and approved by the Joint Congressional Power Commission to implement the provisions of this Act;

(bb) "Independent Power Producer" or "IPP" refers to an existing power generating entity which is not owned by the government;

(cc) "Isolated Distribution System" refers to the low or high voltage backbone system of wires and associated facilities not directly connected to the national transmission system;

(dd) "Lifeline Rate" refers to the subsidized rate given to low-income captive market end-users who cannot afford to pay at full cost;

(ee) "National Electrification Administration" or "NEA" refers to the government agency created under Presidential Decree No. 269, as amended, and whose additional mandate is further set forth herein;

(ff) "National Power Corporation" or "NPC" refers to the government corporation created under Republic Act No. 6395, as amended;

(gg) "National Transmission Corporation" or "TRANSCO" refers to the corporation organized to acquire all the transmission assets of the NPC pursuant to this Act;

(hh) "Open Access" refers to the provision of allowing any qualified user the use of transmission, and/or distribution system and associated facilities subject to the payment of transmission and/or distribution retail wheeling rates duly approved by the ERC;

(ii) "Philippine Energy Plan" or "PEP" refers to the overall energy program formulated and updated yearly by the DOE for submission to Congress pursuant to Republic Act No. 7638;

(jj) "Power Development Program" or "PDP" refers to the indicative plan for managing electricity demand through energy-efficient programs and for the upgrading, expansion, rehabilitation, repair and maintenance of power generation and transmission facilities, formulated and updated yearly by the DOE in coordination with the generation, transmission and electric utility companies;

(kk) "Power Sector Assets and Liabilities Management Corporation" or "PSALM Corp." refers to the corporation organized pursuant to Section 49 hereof;

(ll) "Privatization" refers to the sale, disposition, change and transfer of ownership and control of assets and IPP contracts from the Government or a government corporation to a private person or entity;

(mm) "Renewable Energy Resources" refers to energy resources that do not have an upper limit on the total quantity to be used. Such resources are renewable on a regular basis and the renewable rate is rapid enough to consider availability over an indefinite time. These include, among others, biomass, solar, wind, hydro and ocean energy;

(nn) "Restructuring" refers to the process of reorganizing the electric power industry in order to introduce higher efficiency, greater innovation and end-user choice. It shall be understood as covering a range of alternatives enhancing exposure of the industry to competitive market forces;

(oo) "Small Power Utilities Group" or "SPUG" refers to the functional unit of NPC created to pursue missionary electrification function;

(pp) "Stranded contract costs of NPC or distribution utility" refer to the excess of the contracted cost of electricity under eligible contracts over the actual selling price of such contracts in the market. Such contracts shall have been accredited by the DOE or NPC and approved by the ERB as of the effectivity of this Act;

(qq) "Stranded Debts of NPC" refer to any unpaid financial obligations of NPC which have not been liquidated by the proceeds from sales and privatization of NPC assets;

(rr) "Subtransmission Assets" refer to the facilities related to the power delivery service below the transmission voltages and defined as facilities based on the functional assignment of assets including, but not limited to, step-down transformers solely used by load customers, associated switchyard/substation, control and protective equipment, reactive compensation equipment to improve customer power factor, overhead lines, and the land where such facilities/equipment are located, where applicable. These include NPC assets linking the transmission system and the distribution system which are neither classified as generation nor transmission;

(ss) "Supplier" refers to any person or entity authorized by the ERC to sell, broker, market or aggregate electricity to the end-users;

(tt) "Supply Charge" refers to the charge imposed by electricity suppliers for the sale of electricity to end-users, excluding the charges for generation, transmission and distribution wheeling;

(uu) "Supply of Electricity" means the sale of electricity by persons or entities authorized pursuant to this Act;

(vv) "Transmission Charge" refers to the regulated cost or charges for the use of a transmission system which may include the availment of ancillary services

(ww) "Transmission Development Plan" or "TDP" refers to the program for managing the transmission system through efficient planning for the expansion, upgrading, rehabilitation, repair and maintenance, to be formulated by DOE and implemented by the TRANSCO pursuant to this Act;

(xx) "Transmission of Electricity" refers to the conveyance of electricity through the high voltage backbone system; and

(yy) "Universal Charge" refers to the charge, if any, imposed for the recovery of the stranded cost and other purposes.

Section 5. Organization. - The electric power industry shall be divided into four (4) sectors, namely: generation; transmission; distribution and supply.

Section 6. Generation Sector. - Generation of electric power shall be competitive and open.

Upon the effectivity of this Act, any new generation company shall, before it operates, secure from the Energy Regulatory Commission a certificate of compliance pursuant to the standards set forth in this Act, as well as health, safety and environmental clearances from the appropriate government agencies under existing laws.

Any law to the contrary notwithstanding, power generation shall not be considered a public utility operation. For this purpose, any person or entity engaged or which shall engage in power generation and supply of electricity shall not be required to secure a local or national franchise.

Upon implementation of retail competition and open access, the prices charged by a generation company for supply of electricity shall not be subject to regulation by the ERC except as otherwise provided in this Act

Pursuant to the objective of lowering electricity rates to end-users, sales of generated power by generation companies shall be value added tax zero-rated.

The ERC shall, in determining the existence of market power abuse or anti-competitive behavior, require from generation companies the submission of their individual pricing formulas as well as their financial statements.

Section 7. Transmission Sector. - The transmission of electric power shall be a regulated common electricity carrier business, subject to the ratemaking powers of the ERC.

The ERC shall set the standards of the voltage transmission that shall distinguish the transmission from the subtransmission assets. Pending the issuance of such new standards, the distinction between the transmission and subtransmission assets shall be as follows: 230 kilovolts and above in the Luzon Grid, 69 kilovolts and above in the Visayas and in the isolated distribution systems, and 138 kilovolts and above in the Mindanao Grid: Provided, That for the Visayas and the isolated distribution system, should the 69 kilovolt line not form part of the main transmission grid and be directly connected to the substation of the distribution utility, it shall form part of the subtransmission system.

Section 8. Creation of the National Transmission Company. - There is hereby created a National Transmission Corporation, hereinafter referred to as TRANSCO, which shall assume the electrical transmission function of the National Power Corporation, and have the powers and functions hereinafter granted. The TRANSCO shall assume the authority and responsibility of NPC for the planning, construction and centralized operation and maintenance of its high voltage transmission facilities, including grid interconnections and ancillary services.

Within six (6) months from the effectivity of this Act, the transmission and subtransmission facilities of NPC and all other assets related to transmission operations, including the nationwide franchise of NPC for the operation of the transmission system and the grid, shall be transferred to the TRANSCO. The TRANSCO shall be wholly owned by the Power Sector Assets and Liabilities Management Corporation (PSALM Corp.).

The subtransmission functions and assets shall be segregated from the transmission functions, assets and liabilities for transparency and disposal: Provided, That the subtransmission assets shall be operated and maintained by TRANSCO until their disposal to qualified distribution utilities which are in a position to take over the responsibility for operating, maintaining, upgrading, and expanding said assets. All transmission and subtransmission related liabilities of NPC shall be transferred to and assumed by the PSALM Corp.

TRANSCO shall negotiate with and thereafter transfer such functions, assets, and associated liabilities to the qualified distribution utility or utilities connected to such subtransmission facilities not later than two (2) years from the effectivity of this Act or the start of open access, whichever comes earlier: Provided, That in the case of electric cooperatives, the TRANSCO shall grant concessional financing over a period of twenty (20) years: Provided, however, That the installment payments to TRANSCO for the acquisition of subtransmission facilities shall be given first priority by the electric cooperatives out of the net income derived from such facilities. The TRANSCO shall determine the disposal value of the subtransmission assets based on the revenue potential of such assets.

In case of disagreement in valuation, procedures, ownership participation and other issues, the ERC shall resolve such issues.

The take over by a distribution utility of any subtransmission asset shall not cause a diminution of service and quality to the end-users. Where there are two or more connected distribution utilities, the consortium or juridical entity shall be formed by and composed of all of them which has been granted a franchise to operate the subtransmission asset by the ERC. The subscription rights of each distribution utility involved shall be proportionate to their load requirements unless otherwise agreed by the parties.

Aside from the PSALM Corp., TRANSCO and connected distribution utilities, no third party shall be allowed ownership or management participation, in whole or in part, in such subtransmission entity.

The TRANSCO may exercise the power of eminent domain subject to the requirements of the Constitution and existing laws. Except as provided herein, no person, company or entity other than the TRANSCO shall own any transmission facilities.

Prior to the transfer of the transmission functions by NPC to TRANSCO, and before promulgation of the Grid Code, ERC shall ensure that NPC shall provide to all electric power industry participants open and non-discriminatory access to its transmission system. Any violation thereof shall be subject to the fines and penalties imposed herein.

Section 9. Functions and Responsibilities. - Upon the effectivity of this Act, the TRANSCO shall have the following functions and responsibilities:

(a) Act as the system operator of the nationwide electrical transmission and subtransmission system, to be transferred to it by NPC;

(b) Provide open, equal and non-discriminatory access to its transmission system to all electricity users;

(c) Ensure and maintain the reliability, adequacy, security, stability and integrity of the nationwide electrical grid in accordance with the performance standards for the operation and maintenance of the grid, as set forth in a Grid Code to be adopted and promulgated by the ERC within six (6) months from the effectivity of this Act;

(d) Improve and expand its transmission facilities, consistent with the Grid Code and the Transmission Development Plan (TDP) to be promulgated pursuant to this Act, to adequately serve generation companies, distribution utilities and suppliers requiring transmission service and/or ancillary services through the transmission system: Provided, That TRANSCO shall submit any plan for expansion or improvement of its facilities for approval by the ERC;

(e) Subject to technical constraints, the grid operator of the TRANSCO shall provide central dispatch of all generation facilities connected, directly or indirectly, to the transmission system in accordance with the dispatch schedule submitted by the market operator, taking into account outstanding bilateral contracts; and

(f) TRANSCO shall undertake the preparation of the TDP. In the preparation of the TDP, TRANSCO shall consult the other sectors of the power industry such as the generation companies, distribution utilities, and the electricity end-users. The TDP shall be submitted to the DOE for integration with the Power Development Program and the National Energy Plan, provided for in Republic Act No. 7638 otherwise known as "the Department of Energy Act of 1992".

A generation company may develop and own or operate dedicated point-to-point limited transmission facilities that are consistent with the TDP: Provided, That such facilities are required only for the purpose of connecting to the transmission system, and are used solely by the generating facility, subject to prior authorization by the ERC: Provided, further, That in the event that such assets are required for competitive purposes, ownership of the same shall be transferred to the TRANSCO at a fair market price: Provided, finally, That in case of disagreement on the fair market price, the ERC shall determine the fair market value of the asset.

Section 10. Corporate Powers of the TRANSCO. - As a corporate entity, TRANSCO shall have the following corporate powers:

(a) To have continuous succession under its corporate name until otherwise provided by law;

(b) To adopt and use a corporate seal and to change, alter or modify the same, if necessary;

(c) To sue and be sued;

(d) To enter into a contract and execute any instrument necessary or convenient for the purpose for which it is created;

(e) To borrow funds from any source, whether private or public, foreign or domestic, and issue bonds and other evidence of indebtedness: Provided, That in the case of the bond issues, it shall be subject to the approval of the President of the Philippines upon recommendation of the Secretary of Finance: Provided, further, That foreign loans shall be obtained, for and in behalf of TRANSCO, in accordance with law and the rules and regulations of the Bangko Sentral ng Pilipinas;

(f) To maintain a provident fund which consists of contributions made by both the TRANSCO and its officials and employees and their earnings for the payment of benefits to such officials and employees or their heirs under such terms and conditions as it may prescribe;

(g) To do any act necessary or proper to carry out the purpose for which it is created, or which, from time to time, may be declared by the TRANSCO Board as necessary, useful, incidental or auxiliary to accomplish its purposes and objectives; and,

(h) Generally, to exercise all the powers of a corporation under the corporation law insofar as they are not inconsistent with this Act.

Section 11. TRANSCO Board of Directors. - All the powers of the TRANSCO shall be vested in and exercised by a Board of Directors. The Board shall be composed of a Chairman and six (6) members. The Secretary of the Department of Finance (DOF) shall be the ex-officio Chairman of the Board. The other members of the TRANSCO Board shall include the Secretary of the Department of Energy (DOE), the Secretary of the Department of Environment and Natural Resources (DENR), the President of TRANSCO, one member each representing Luzon, Visayas and Mindanao.

The members of the Board shall be appointed by the President of the Philippines and shall serve for a term of six (6) years, except that any person appointed to fill-in a vacancy shall serve only the unexpired term of his/her predecessor in office. All members of the Board shall be professionals of recognized competence and expertise in the fields of engineering, finance, economics, law or business management. No member of the Board or any of his relatives within the fourth civil degree of consanguinity or affinity shall have any interest, either as investor, officer or director, in any generation company or distribution utility or other entity engaged in transmitting, generating and supplying electricity specified by ERC.

Section 12. Powers and Duties of the Board. - The following are the powers of the Board:

(a) To provide strategic direction for TRANSCO, and formulate medium and long-term strategies pursuant to the vision, mission, and objectives of TRANSCO;

(b) To develop and adopt policies and measures for the efficient and effective management and operation of TRANSCO;

(c) To organize, re-organize, and determine the organizational structure and staffing pattern of TRANSCO; abolish and create offices and positions; fix the number of its officers and employees; transfer and re-align such officers and personnel; fix their compensation, allowance, and benefits;

(d) To fix the compensation of the President of TRANSCO and to appoint and fix the compensation of other corporate officers;

(e) For cause, to suspend or remove any corporate officer appointed by the Board;

(f) To adopt and set guidelines for the employment of personnel on the basis of merit, technical competence, and moral character; and

(g) Any provisions of the law to the contrary notwithstanding, to write-off bad debts.

Section 13. Board Meetings. - The Board shall meet as often as may be necessary upon the call of the Chairman of the Board or by a majority of the Board members.

Section 14. Board Per Diems and Allowances. - The members of the Board shall receive per diem for each regular or special meeting of the Board actually attended by them, and, upon approval of the Secretary of the Department of Finance, such other allowances as the Board may prescribe.

Section 15. Quorum. - The presence of at least four (4) members of the Board shall constitute a quorum, which shall be necessary for the transaction of any business. The affirmative vote of a majority of the members present in a quorum shall be adequate for the approval of any resolution, decision or order except when the Board shall agree that a greater vote is required.

Section 16. Powers of the President of TRANSCO. - The President of TRANSCO shall be appointed by the President of the Philippines. In the absence of the Chairman, the President shall preside over Board meetings. The TRANSCO President shall be the Chief Executive Officer of TRANSCO.

The President of TRANSCO shall have the following powers and duties:

(a) To execute and administer the policies and measures approved by the Board, and take responsibility for the efficient discharge of management functions;

(b) To oversee the preparation of the budget of TRANSCO;

(c) To direct and supervise the operation and internal administration of TRANSCO and, for this purpose, may delegate some or any of his administrative responsibilities and duties to other officers of TRANSCO

(d) Subject to the guidelines and policies set up by the Board, to appoint and fix the number and compensation of subordinate officials and employees of TRANSCO; and for cause, to remove, suspend, or otherwise discipline any subordinate employee of TRANSCO

(e) To submit an annual report to the Board on the activities and achievements of TRANSCO at the close of each fiscal year and upon approval thereof, submit a copy to the President of the Philippines and to such other agencies as may be required by law

(f) To represent TRANSCO in all dealings and transactions with other offices, agencies, and instrumentalities of the Government and with all persons and other entities, private or public, domestic or foreign; and

(g) To exercise such other powers and duties as may be vested in him by the Board from time to time.

Section 17. Exemption from the Salary Standardization Law. - The salaries and benefits of employees in the TRANSCO shall be exempt from Republic Act No. 6758 and shall be fixed by the TRANSCO Board.

Section 18. Profits. - The net profit, if any, of TRANSCO shall be remitted to the PSALM Corp. not later than thirty (30) days after the immediately preceding quarter.

Section 19. Transmission Charges. - The transmission charges of the TRANSCO shall be filed with and approved by the ERC pursuant to paragraph (f) of Section 43 hereof.

Section 20. TRANSCO Related Businesses. - TRANSCO may engage in any related business which maximizes utilization of its assets: Provided, That a portion of the net income derived from such undertaking utilizing assets which form part of the rate base shall be used to reduce transmission wheeling rates as determined by the ERC. Such portion of net income used to reduce the transmission wheeling rates shall not exceed fifty percent (50%) of the net income derived from such undertaking.

Separate accounts shall be maintained for each business undertaking to ensure that the transmission business shall neither subsidize in any way such business undertaking nor encumber its transmission assets in any way to support such business.

Section 21. TRANSCO Operations & Maintenance (O&M) Concessionaire. - The TRANSCO shall award, in open competitive bidding, a concession contract to a qualified party for the operation, maintenance, improvement and expansion of its transmission assets and the operation of any related business for a period of twenty-five (25) years, subject to review and renewal for a maximum period of another twenty-five (25) years. The contract shall include, but not limited to, the provision for performance and financial guarantees or any other covenants which may be required in order to fulfill the obligations of the concession contract.

The TRANSCO O & M Concessionaire shall comply with the Grid Code and the TDP as approved. Failure to comply with such obligations shall result in the imposition of appropriate sanctions or penalties by the ERC: Provided, however, That in cases of major or serious economic and/or technical reasons, TRANSCO O & M Concessionaire may seek authority from the ERC to defer any expansion or improvement.

The concessionaire shall be financially and technically capable, with proven domestic and/or international experience and expertise as a leading transmission system operator under a competitive electric power industry structure. The experience of the strategic partner must be with a transmission system of equal, if not greater, capacity and coverage as the Philippines.

Section 22. Distribution Sector. - The distribution of electricity to end-users shall be a regulated common carrier business requiring a franchise. Distribution of electric power to all end-users may be undertaken by private distribution utilities, cooperatives, local government units presently undertaking this function and other duly authorized entities, subject to regulation by the ERC.

Section 23. Functions of Distribution Utilities. - A distribution utility shall have the obligation to provide distribution services and connections to its system for any end-user within its franchise area consistent with the distribution code. Any entity engaged therein shall provide open and non-discriminatory access to its distribution system to all users.

Any distribution utility shall be entitled to impose and collect distribution retail wheeling charges and connection fees from such end-users as approved by the ERC. A distribution utility shall have the obligation to supply electricity in the least cost manner to its captive market, subject to the collection of distribution retail supply rate duly approved by the ERC.

To achieve economies of scale in utility operations, distribution utilities may, after due notice and public hearing, pursue structural and operational reforms such as but not limited to, joint actions between or among the distribution utilities, subject to the guidelines issued by the ERC. Such joint actions shall result in improved efficiencies, reliability of service, reduction of costs and compliance to the performance standards prescribed in the IRR of this Act. Distribution utilities shall submit to the ERC a statement of their compliance with the technical specifications prescribed in the Distribution Code and the performance standards prescribed in the IRR of this Act. Distribution utilities which do not comply with any of the prescribed technical specifications and performance standards shall submit to the ERC a plan to comply, within three (3) years, with said prescribed technical specifications and performance standards. The ERC shall, within sixty (60) days upon receipt of such plan, evaluate the same and notify the distribution utility concerned of its action. Failure to submit a feasible and credible plan and/or failure to implement the same shall serve as grounds for the imposition of appropriate sanctions, fines or penalties.

Distribution utilities shall prepare and submit to the DOE their annual distribution development plans. In the case of electric cooperatives, such plans shall also be submitted through the National Electrification Administration.

Distribution utilities shall provide universal service within their franchise, including unviable areas, as part of their social obligations in a manner that shall sustain the economic viability of the utility, subject to the approval by the ERC in the case of private or government-owned utilities. Areas which a franchised distribution utility cannot or does not find viable may be transferred to another distribution utility, if any is available, who will provide the service, subject to approval by ERC. In cases where franchise holders fail and/or refuse to service any area within their franchise territory and allowed another utility to service the same, then the status quo shall be respected. To this end, distribution utilities shall submit to the DOE their plans for serving such areas as part of their distribution development plans. In cases of major or serious economic and/or technical reasons, the distribution utility shall seek prior authority from the ERC to defer such expansion or improvement.

Distribution utilities may exercise the power of eminent domain subject to the requirements of the constitution and existing laws.

Section 24. Distribution Retail Wheeling Charge. - The retail wheeling rates of distribution utilities shall be filed with and approved by the ERC pursuant to paragraph (f) of Section 43 hereof.

Section 25. Distribution Retail Supply Rate. - The rates charged by distribution utilities for the supply of electricity in their captive market shall be subject to regulation by the ERC based on the principle of full recovery of prudent and reasonable economic costs incurred, or such other principles that will promote efficiency as may be determined by the ERC.

Every distribution utility shall identify and segregate in its bills to end-users the components of the distribution retail supply rate, as defined in this Act.

Section 26. Distribution Related Businesses. - Distribution utilities may, directly or indirectly, engage in any related business undertaking which maximizes the utilization of their assets: Provided, That a portion of the net income derived from such undertaking utilizing assets which form part of the rate base shall be used to reduce its distribution retail wheeling charges as determined by the ERC: Provided, further, That such portion of net income used to reduce their distribution retail wheeling charges shall not exceed fifty percent (50%) of the net income derived from such undertaking: Provided, finally, That separate accounts are maintained for each business undertaking to ensure that the distribution business shall neither subsidize in any way such business undertaking nor encumber its distribution assets in any way to support such business.

Section 27. Franchising Power in the Electric Power Sector. - The power to grant franchises to persons engaged in the transmission and distribution of electricity shall be vested exclusively in the Congress of the Philippines and all laws inconsistent with this Act particularly, but not limited to, Section 43 of PD 269, otherwise known as the "National Electrification Decree," are hereby deemed repealed or modified accordingly: Provided, That all existing franchises shall be allowed to their full term: Provided, further, That in the case of electric cooperatives, renewals and cancellations shall remain with the National Electricity Commission under the National Electrification Administration for five (5) more years after the enactment of this Act.

Section 28. De-monopolization and Shareholding Dispersal. - In compliance with the constitutional mandate for dispersal of ownership and de-monopolization of public utilities, the holdings of persons, natural or juridical, including directors, officers, stockholders and related interests, in a generation company, distribution utility and their respective holding companies shall not exceed fifteen (15%) percent of the voting shares of stock unless the utility or the company holding the shares or its controlling stockholders are already listed in the Philippine Stock Exchange (PSE): Provided, That controlling stockholders of small distribution utilities are required to list in the PSE within five (5) years from the enactment of this Act if they already own the stocks. New controlling stockholders shall undertake such listing within five (5) years from the time they acquire ownership and control. A small distribution company is one whose peak demand is One hundred megawatts (100MW) or less.

The ERC shall, within sixty (60) days from the effectivity of this Act, promulgate the rules and regulations to implement and effect this provision.

Section 29. Supply Sector. - The supply of electricity to the contestable market shall require a license from the ERC, except for distribution utilities and electric cooperatives with respect to their existing franchise areas.

For this purpose, the ERC shall promulgate rules and regulations prescribing the qualifications of electricity suppliers which shall include, among other requirements, a demonstration of their technical capability, financial capability, and creditworthiness: Provided, That the ERC shall have authority to require electricity suppliers to furnish a bond or other evidence of the ability of a supplier to withstand market disturbances or other events that may increase the cost of providing service.

Any law to the contrary notwithstanding, supply of electricity to the contestable market shall not be considered a public utility operation. For this purpose, any person or entity which shall engage in the supply of electricity to the contestable market shall not be required to secure a local or national franchise.

The prices to be charged by suppliers for the supply of electricity to the contestable market shall not be subject to regulation by the ERC.

Electricity suppliers shall be subject to the rules and regulations concerning abuse of market power, cartelization, and other anti-competitive or discriminatory behavior to be promulgated by the ERC.

In its billings to end-users, every supplier shall identify and segregate the components of its supply charge, as defined herein.

Section 30. Wholesale Electricity Spot Market. - Within one (1) year from the effectivity of this Act, the DOE shall establish a wholesale electricity spot market composed of the wholesale electricity spot market participants. The market shall provide the mechanism for identifying and setting the price of actual variations from the quantities transacted under contracts between sellers and purchasers of electricity.

Jointly with the electric power industry participants, the DOE shall formulate the detailed rules for the wholesale electricity spot market. Said rules shall provide the mechanism for determining the price of electricity not covered by bilateral contracts between sellers and purchasers of electricity users. The price determination methodology contained in said rules shall be subject to the approval of ERC. Said rules shall also reflect accepted economic principles and provide a level playing field to all electric power industry participants. The rules shall provide, among others, procedures for:

(a) Establishing the merit order dispatch instructions for each time period;

(b) Determining the market-clearing price for each time period;

(c) Administering the market including criteria for admission to and termination from the market which includes security or performance bond requirements, voting rights of the participants, surveillance and assurance of compliance of the participants with the rules and the formation of the wholesale electricity spot market governing body;

(d) Prescribing guidelines for the market operation in system emergencies; and

(e) Amending the rules.

The wholesale electricity spot market shall be implemented by a market operator in accordance with the wholesale electricity spot market rules. The market operator shall be an autonomous group, to be constituted by DOE, with equitable representation from electric power industry participants, initially under the administrative supervision of the TRANSCO. The market operator shall undertake the preparatory work and initial operation of the wholesale electricity spot market. Not later than one (1) year after the implementation of the wholesale electricity spot market, an independent entity shall be formed and the functions, assets and liabilities of the market operator shall be transferred to such entity with the joint endorsement of the DOE and the electric power industry participants. Thereafter, the administrative supervision of the TRANSCO over such entity shall cease.

Subject to the compliance with the membership criteria, all generating companies, distribution utilities, suppliers, bulk consumers/end-users and other similar entities authorized by the ERC shall be eligible to become members of the wholesale electricity spot market.

The ERC may authorize other similar entities to become eligible as members of the wholesale electricity spot market either directly or indirectly. All generating companies, distribution utilities, suppliers, bulk consumers/end-users and other similar entities authorized by the ERC, whether direct or indirect members of the wholesale electricity spot market, shall be bound by the wholesale electricity spot market rules with respect to transactions in that market. NEA may, in exchange for adequate security and a guarantee fee, act as a guarantor for purchases of electricity in the wholesale electricity spot market by any electric cooperative or small distribution utility to support their credit standing consistent with the provisions hereof. For this purpose, the authorized capital stock of NEA is hereby increased to Ten billion pesos (P10,000,000,000.00).

All electric cooperatives which have outstanding uncollected billings to any local government unit shall report such billings to NEA which shall, in turn, report the same to the Department of Budget and Management (DBM) for collection pursuant to Executive Order 190 issued on December 21, 1999.

The cost of administering and operating the wholesale electricity spot market shall be recovered by the market operator through a charge applied to all market members: Provided, That such charge shall be filed with and approved by the ERC.

In cases of national and international security emergencies or natural calamities, the ERC is hereby empowered to suspend the operation of the wholesale electricity spot market or declare a temporary wholesale electricity spot market failure.

Section 31. Retail Competition and Open Access. - Retail competition and open access on distribution wires shall be implemented not later than three (3) years upon the effectivity of this Act subject to compliance with the following conditions precedent:

(a) Establishment of the wholesale electricity spot market;

(b) Approval of unbundled transmission and distribution retail wheeling charges;

(c) Initial implementation of the cross subsidy removal scheme; and

(d) Privatization of at least 70% of the total capacity of generating assets of NPC and of the total capacity of the power plants under contract with NPC in Luzon and Visayas. Upon the initial implementation of open access, the ERC shall allow all electricity end-users located in Luzon with a maximum demand of at least two megawatts (2MW) to be the contestable market. For the Visayas and Mindanao areas, the initial threshold level shall be one and a quarter megawatts (1.25MW). However, the ERC shall, on January 1, 2004, reduce the maximum demand for the contestable market in Luzon to one megawatt (1MW) for at least two (2) years and Seven hundred fifty kilowatts (750kW) for the Visayas and Mindanao areas. Thereafter, the ERC shall determine a threshold level when open access shall apply to all distribution utilities.

In the case of electric cooperatives, retail competition and open access shall be implemented not earlier than five (5) years upon the effectivity of this Act.

Section 32. NPC Stranded Debt and Contract Cost Recovery. - Stranded debt of NPC shall refer to any unpaid financial obligations of NPC which have not been liquidated by the proceeds from sales and privatization of NPC assets.

Stranded contract costs of NPC shall refer to the excess of the contracted cost of electricity under eligible IPP contracts of NPC over the actual selling price of such contracts in the market. Such contracts shall have been accredited by the DOE or NPC and approved by the ERB as of the effectivity of this Act.

The national government shall, in exchange for the equivalent amount of the equity of NPC, directly assume a portion of the financial obligations of NPC in an amount not to exceed Two Hundred Billion Pesos (P200,000,000,000.00). For this purpose, the capital stock of NPC shall be increased to Three hundred billion pesos (P300,000,000,000.00) common shares which shall be divided into Three billion (3,000,000,000.00) shares with a par value of One hundred pesos (P100.00) per share.

The ERC shall verify the reasonable amounts and determine the manner and duration for the full recovery of stranded debt and stranded contract costs as defined herein: Provided, That the duration for such recovery shall not be shorter than fifteen (15) years nor longer than twenty-five (25) years. The ERC shall, at the end of the first year of the implementation of stranded cost recovery and every year thereafter, conduct a review to determine whether there is under-recovery or over-recovery and adjust (true-up) the level of stranded cost recovery charge accordingly.

The NPC and PSALM shall have the duty to mitigate all potential stranded contract costs of NPC.

Section 33. Distribution Utilities Stranded Contract Costs Recovery. - Stranded contract costs of distribution utilities shall refer to the excess of the contracted cost of electricity under eligible contracts of such utilities over the actual selling price of such contracts in the market. Such contracts shall have been accredited by the DOE or NPC and approved by the ERB as of the effectivity of this Act.

Within one (1) year from the start of open access, any distribution utility that intends to seek recovery of stranded contract costs shall file notice of such intent with the ERC together with an estimate of such obligations, including the present value thereof and such other supporting data as may be required by the ERC. Any distribution utility that does not file within the date specified shall not be eligible for such recovery.

Any distribution utility which opts to recover stranded cost shall have a duty to mitigate its potential stranded contract costs by making reasonable best efforts to:

(a) reduce the costs of its existing contracts with IPPs; and

(b) submit to an annual earnings review by the ERC and use its earnings above its authorized rate of return to reduce the book value of contracts until the end of the stranded cost recovery period.

Other mitigating measures which are reasonably known and generally accepted within the electric power industry shall be utilized. The ERC shall not require the distribution utility to take a loss to reduce stranded contract costs or divest assets, unless the divestiture is imposed as a penalty as provided herein.

The relevant distribution utility shall submit to the ERC quarterly reports showing the amount of stranded costs recovered and the balance remaining to be recovered. The ERC shall verify the reasonable amounts and determine the manner and duration for the full recovery of stranded contract costs as defined herein: Provided, That the duration for such recovery shall not be shorter than fifteen (15) years nor longer than twenty-five (25) years. The ERC shall, at the end of the first year of the implementation of stranded cost recovery and every year thereafter, conduct a review to determine whether there is under-recovery or over recovery and adjust (true-up) the level of stranded cost recovery charge accordingly.

Section 34. Universal Charge. - Within one (1) year from the effectivity of this Act, a universal charge to be determined, fixed and approved by the ERC, shall be imposed on all electricity end-users for the following purposes:

(a) Payment for the stranded debts and stranded contract costs of NPC and qualified distribution utilities resulting from the restructuring of the industry;

(b) Missionary electrification;

(c) The equalization of the taxes and royalties applied to indigenous or renewable sources of energy vis-à-vis imported energy fuels;

(d) An environmental charge equivalent to one-fourth of one centavo per kilowatt-hour (P0.0025/kWh), which shall accrue to an environmental fund to be used solely for watershed rehabilitation and management. Said fund shall be managed by NPC under existing arrangements; and

(e) A charge to account for all forms of cross-subsidies for a period not exceeding three (3) years.

The universal charge shall be a non-bypassable charge which shall be passed on and collected from all end-users on a monthly basis by the distribution utilities. Collections by the distribution utilities and the TRANSCO in any given month shall be remitted to the PSALM Corp. on or before the fifteenth (15 th ) of the succeeding month, net of any amount due to the distribution utility. Any end-user or self-generating entity not connected to a distribution utility shall remit its corresponding universal charge directly to the TRANSCO.

The PSALM Corp., as administrator of the fund, shall create a Special Trust Fund which shall be disbursed only for the purposes specified herein in an open and transparent manner. All amounts collected for the universal charge shall be distributed to the respective beneficiaries within a reasonable period to be provided by the ERC.

Section 35. Royalties, Returns and Tax Rates for Indigenous Energy Resources. - The provision of Section 79 of Commonwealth Act No. 137 (C.A. No. 137) and any law to the contrary notwithstanding, the royalties, returns and taxes collected for the exploitation of all indigenous sources of energy, including but not limited to, natural gas and geothermal steam, shall be adjusted so as to effect parity of tax treatment with the existing rates for imported coal, crude oil, bunker fuel and other imported fuels.

To ensure that the adjustment of tax rates and royalties shall result in lower rates for end-users, the Department of Finance shall, within sixty (60) days from the effectivity of this Act, issue the rules and regulations thereof. Consistent with this objective, the ERC shall forthwith revise the rates of power from all indigenous sources of energy.

Section 36. Unbundling of Rates and Functions. - Within six (6) months from the effectivity of this Act, NPC shall file with the ERC its revised rates. The rates of NPC shall be unbundled between transmission and generation rates and the rates shall reflect the respective costs of providing each service. Inter-grid and intra-grid cross subsidies for both the transmission and the generation rates shall be removed in accordance with this Act.

Within six (6) months from the effectivity of this Act, each distribution utility shall file its revised rates for the approval by the ERC. The distribution retail wheeling charge shall be unbundled from the distribution retail supply rate and the rates shall reflect the respective costs of providing each service. For both the distribution retail wheeling and supply charges, inter-class subsidies shall be removed in accordance with this Act.

Within six (6) months from the date of submission of revised rates by NPC and each distribution utility, the ERC shall notify the entities of their approval.

Any electric power industry participant shall functionally and structurally unbundle its business activities and rates in accordance with the sectors as identified in Section 5 hereof. The ERC shall ensure full compliance with this provision.

Section 37. Powers and Functions of the DOE. - In addition to its existing powers and functions, the DOE is hereby mandated to supervise the restructuring of the electricity industry. In pursuance thereof, Section 5 of R. A. 7638 otherwise known as "The Department of Energy Act of 1992" is hereby amended to read as follows:

(a) Formulate policies for the planning and implementation of a comprehensive program for the efficient supply and economical use of energy consistent with the approved national economic plan and with the policies on environmental protection and conservation and maintenance of ecological balance, and provide a mechanism for the integration, rationalization, and coordination of the various energy programs of the Government

(b) Develop and update annually the existing Philippine Energy Plan, hereinafter referred to as 'The Plan', which shall provide for an integrated and comprehensive exploration, development, utilization, distribution, and conservation of energy resources, with preferential bias for environment-friendly, indigenous, and low-cost sources of energy. The plan shall include a policy direction towards the privatization of government agencies related to energy, deregulation of the power and energy industry, and reduction of dependency on oil-fired plants. Said Plan shall be submitted to Congress not later than the fifteenth day of September every year thereafter;

(c) Prepare and update annually a Power Development Program (PDP) and integrate the same into the Philippine Energy Plan. The PDP shall consider and integrate the individual or joint development plans of the transmission, generation, and distribution sectors of the power industry, which are submitted to the Department: Provided, however, That the ERC shall have exclusive authority covering the Grid Code and the pertinent rules and regulations it may issue;

(d) Ensure the reliability, quality and security of supply of electric power;

(e) Following the restructuring of the electricity sector, the DOE shall, among others:

(i) Encourage private sector investments in the electricity sector and promote development of indigenous and renewable energy sources;

(ii) Facilitate and encourage reforms in the structure and operations of distribution utilities for greater efficiency and lower costs;

(iii) In consultation with other government agencies, promote a system of incentives to encourage industry participants, including new generating companies and end-users to provide adequate and reliable electric supply; and

(iv) Undertake, in coordination with the ERC, NPC, NEA and the Philippine Information Agency (PIA), information campaign to educate the public on the restructuring of the electricity sector and privatization of NPC assets;

(f) Jointly with the electric power industry participants, establish the wholesale electricity spot market and formulate the detailed rules governing the operations thereof;

(g) Establish and administer programs for the exploration, transportation, marketing, distribution, utilization, conservation, stockpiling, and storage of energy resources of all forms, whether conventional or non-conventional;

(h) Exercise supervision and control over all government activities relative to energy projects in order to attain the goals embodied in Section 2 of RA 7638;

(i) Develop policies and procedures and, as appropriate, promote a system of energy development incentives to enable and encourage electric power industry participants to provide adequate capacity to meet demand including, among others, reserve requirements;

(j) Monitor private sector activities relative to energy projects in order to attain the goals of the restructuring, privatization, and modernization of the power sector as provided for under existing laws: Provided, That the Department shall endeavor to provide for an environment conducive to free and active private sector participation and investment in all energy activities;

(k) Assess the requirements of, determine priorities for, provide direction to, and disseminate information resulting from energy research and development programs for the optimal development of various forms of energy production and utilization technologies; (l) Formulate and implement programs, including a system of providing incentives and penalties, for the judicious and efficient use of energy in all energy-consuming sectors of the economy;

(m) Formulate and implement a program for the accelerated development of non-conventional energy systems and the promotion and commercialization of its applications;

(n) Devise ways and means of giving direct benefit to the province, city, or municipality, especially the community and people affected, and equitable preferential benefit to the region that hosts the energy resource and/or the energy-generating facility: Provided, however, That the other provinces, cities, municipalities, or regions shall not be deprived of their energy requirements;

(o) Encourage private enterprises engaged in energy projects, including corporations, cooperatives, and similar collective organizations, to broaden the base of their ownership and thereby encourage the widest public ownership of energy-oriented corporations;

(p) Formulate such rules and regulations as may be necessary to implement the objectives of this Act; and

(q) Exercise such other powers as may be necessary or incidental to attain the objectives of this Act.

Section 38. Creation of the Energy Regulatory Commission. - There is hereby created an independent, quasi-judicial regulatory body to be named the Energy Regulatory Commission (ERC). For this purpose, the existing Energy Regulatory Board (ERB) created under Executive Order No. 172, as amended, is hereby abolished.

The Commission shall be composed of a Chairman and four (4) members to be appointed by the President of the Philippines. The Chairman and the members of the Commission shall be natural-born citizens and residents of the Philippines, persons of good moral character, at least thirty-five (35) years of age, and of recognized competence in any of the following fields: energy, law, economics, finance, commerce, or engineering, with at least three (3) years actual and distinguished experience in their respective fields of expertise: Provided, That out of the four (4) members of the Commission at least one (1) shall be a member of the Philippine Bar with at least ten (10) years experience in the active practice of law, and one (1) shall be a certified public accountant with at least ten (10) years experience in active practice.

Within three (3) months from the creation of ERC, the Chairman shall submit for approval of the President of the Philippines the new organizational structure and plantilla positions necessary to carry out the powers and functions of the ERC.

The Chairman of the Commission who shall be a member of the Philippine Bar shall act as the Chief Executive Officer of the Commission.

All members of the Commission shall have a term of seven (7) years: Provided, That for the first appointees, the Chairman shall hold office for seven (7) years, two (2) members shall hold office for five (5) years and the other two (2) members shall hold office for three (3) years: Provided, further, That appointment to any future vacancy shall only be for the unexpired term of the predecessor: Provided, finally, That there shall be no reappointment and in no case shall any member serve for more than seven (7) years in the Commission.

The Chairman and Members of the Commission shall assume office at the beginning of their terms: Provided, That, if upon the effectivity of this Act, the Commission has not been constituted and the new staffing pattern and plantilla positions have not been approved and filled-up, the current Board and existing personnel of ERB shall continue to hold office.

The existing personnel of the ERB, if qualified, shall be given preference in the filling up of plantilla positions created in the ERC, subject to existing civil service rules and regulations. Members of the Commission shall enjoy security of tenure and shall not be suspended or removed from office except for just cause as specified by law.

The Chairman and members of the Commission or any of their relatives within the fourth civil degree of consanguinity or affinity, legitimate or common law, shall be prohibited from holding any interest whatsoever, either as investor, stockholder, officer or director, in any company or entity engaged in the business of transmitting, generating, supplying or distributing any form of energy and must, therefore, divest through sale or legal disposition of any and all interests in the energy sector upon assumption of office.

The presence of at least three (3) members of the Commission shall constitute a quorum and the majority vote of two (2) members in a meeting where a quorum is present shall be necessary for the adoption of any rule, ruling, order, resolution, decision or other act of the Commission in the exercise of its quasi-judicial functions: Provided, That in fixing rates and tariffs of transmission, and distribution retail wheeling charges and tariffs of franchise electric utilities and all electric power rates, an affirmative vote of three (3) members shall be required.

Section 39. Compensation and Other Emoluments for ERC Personnel. - The compensation and other emoluments for the Chairman and members of the Commission and the ERC personnel shall be exempted from the coverage of Republic Act No. 6758, otherwise known as the Salary Standardization Act. For this purpose, the schedule of compensation of the ERC personnel, except for the initial salaries and compensation of the Chairman and members of the Commission, shall be submitted for approval by the President of the Philippines. The new schedule of compensation shall be implemented within six (6) months from the effectivity of this Act and may be upgraded by the President of the Philippines as the need arises: Provided, That in no case shall the rate be upgraded more than once a year.

The Chairman and members of the Commission shall initially be entitled to the same salaries, allowances and benefits as those of the Presiding Justice and Associate Justices of the Supreme Court, respectively. The Chairman and the members of the Commission, upon completion of their term or upon becoming eligible for retirement under existing laws shall be entitled to the same retirement benefits and privileges provided for the Presiding Justice and Associate Justices of the Court of Appeals, respectively.

Section 40. Enhancement of Technical Competence. - The ERC shall establish rigorous training programs for its staff for the purpose of enhancing the technical competence of the ERC in the following areas: evaluation of technical performance and monitor compliance with service and performance standards, performance-based rate-setting reform, environmental standards and such other areas as will enable the ERC to adequately perform its duties and functions.

Section 41. Promotion of Consumer Interests. - The ERC shall handle consumer complaints and ensure the adequate promotion of consumer interests.

Section 42. Fiscal Autonomy of the ERC. - The ERC shall enjoy fiscal autonomy, subject to regular audits by the Commission on Audit. The amount of One hundred fifty million pesos (PHP 150,000,000.00) is hereby allocated from the existing budget of the ERB for the initial operation of the ERC. Any balance shall initially be sourced from the Office of the President of the Philippines. Thereafter, the annual budget certified by the ERC, through its chairman, as necessary to defray its expenses shall be provided for in the regular or special appropriations and shall be released automatically and regularly.

Section 43. Functions of the ERC. - The ERC shall promote competition, encourage market development, ensure customer choice and discourage/penalize abuse of market power in the restructured electricity industry. Towards this end, it shall be responsible for the following key functions in the restructured industry:

(a) Enforce the implementing rules and regulations of this Act;

(b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance with law, a National Grid Code and a Distribution Code which shall include, but not limited to, the following:

(i) Performance standards for TRANSCO O & M Concessionaire, distribution utilities and suppliers: Provided, That in the establishment of the performance standards, the nature and function of the entities shall be considered; and

(c) (ii) In consultation with the DOE and DOF, financial capability standards for the generating companies, the TRANSCO, distribution utilities and suppliers: Provided, That in the formulation of the financial capability standards, the nature and function of the entity shall be considered: Provided, further, That such standards are set to ensure that the electric power industry participants meet the minimum financial standards to protect the public interest. Determine, fix, and approve, after due notice and public hearings the universal charge, to be imposed on all electricity end-users pursuant to Sections 34 hereof;

(d) Enforce the rules and regulations governing the operations of the electricity spot market and the activities of the spot market operator and other participants in the spot market, for the purpose of ensuring a greater supply and rational pricing of electricity;

(e) Determine the level of cross subsidies in the existing retail rate until the same is removed pursuant to Section 73 hereof;

(f) Amend or revoke the authority to operate of any person or entity which fails to comply with the provisions hereof, the IRR or any order or resolution of the ERC, after due notice and hearing. In the event a divestment is required, the ERC shall allow the affected party sufficient time to remedy the infraction or for an orderly disposal, but shall in no case exceed twelve (12) months from the issuance of the order;

(g) In the public interest, establish and enforce a methodology for setting transmission and distribution wheeling rates and retail rates for the captive market of a distribution utility, taking into account all relevant considerations, including the efficiency or inefficiency of the regulated entities. The rates must be such as to allow the recovery of just and reasonable costs and a reasonable return on rate base (RORB) to enable the entity to operate viably. The rate-setting methodology so adopted and applied must ensure a reasonable price of electricity. The rates prescribed shall be non-discriminatory. To achieve this objective and to ensure the complete removal of cross subsidies, the cap on the recoverable rate of system losses prescribed in Section 10 of Republic Act No. 7832, is hereby amended and shall be replaced by caps which shall be determined by the ERC based on load density, sales mix, cost of service, delivery voltage and other technical considerations it may promulgate. The ERC shall determine such form of rate-setting methodology, which shall promote efficiency. In case the rate setting methodology used is RORB, it shall be subject to the following guidelines:

(i) For purposes of determining the rate base, TRANSCO or any distribution utility may be allowed to revalue its eligible assets not more than once every three (3) years by an independent appraisal company: Provided, however, That ERC may give an exemption in case of unusual devaluation: Provided, further, That the ERC shall exert efforts to minimize price shocks in order to protect the consumers;

(ii) Interest expenses are not allowable deductions from permissible return on rate base;

(iii) In determining eligible cost of services that will be passed on to the end-users, the ERC shall establish minimum efficiency performance standards for TRANSCO and distribution utilities including systems losses, interruption frequency rates, and collection efficiency;

(iv) Further, in determining rate base, TRANSCO or any distribution utility shall not be allowed to include management inefficiencies like cost of project delays not excused by force majeure, penalties and related interest during construction applicable to these unexcused delays; and

(v) Any significant operating costs or project investments of TRANSCO and distribution utilities which shall become part of the rate base shall be subject to the verification of the ERC to ensure that the contracting and procurement of the equipment, assets and services have been subjected to transparent and accepted industry procurement and purchasing practices to protect the public interest.

(h) Three (3) years after the imposition of the universal charge, ensure that the charges of the TRANSCO or any distribution utility shall bear no cross subsidies between grids, within grids, or between classes of customers, except as provided herein;

(i) Review and approve any changes on the terms and conditions of service of the TRANSCO or any distribution utility;

(j) Allow TRANSCO to charge user fees for ancillary services to all electric power industry participants or self-generating entities connected to the grid. Such fees shall be fixed by the ERC after due notice and public hearing;

(k) Set a lifeline rate for the marginalized end-users;

(l) Monitor and take remedial measures to penalize abuse of market power, cartelization, and anti-competitive or discriminatory behavior by any electric power industry participant;

(m) Impose fines or penalties for any non-compliance with or breach of this Act, the IRR of this Act and the rules and regulations which it promulgates or administers;

(n) Take any other action delegated to it pursuant to this Act;

(o) Before the end of April of each year, submit to the Office of the President of the Philippines and Congress, copy furnished the DOE, an annual report containing such matters or cases which have been filed before or referred to it during the preceding year, the actions and proceedings undertaken and its decision or resolution in each case. The ERC shall make copies of such reports available to any interested party upon payment of a charge which reflects the printing costs. The ERC shall publish all its decisions involving rates and anti-competitive cases in at least one (1) newspaper of general circulation, and/or post electronically and circulate to all interested electric power industry participants copies of its resolutions to ensure fair and impartial treatment;

(p) Monitor the activities of the generation and supply of the electric power industry with the end in view of promoting free market competition and ensuring that the allocation or pass through of bulk purchase cost by distributors is transparent, non-discriminatory and that any existing subsidies shall be divided pro-rata among all retail suppliers;

(q) Act on applications for or modifications of certificates of public convenience and/or necessity, licenses or permits of franchised electric utilities in accordance with law and revoke, review and modify such certificates, licenses or permits in appropriate cases, such as in cases of violations of the Grid Code, Distribution Code and other rules and regulations issued by the ERC in accordance with law;

(r) Act on applications for cost recovery and return on demand side management projects;

(s) In the exercise of its investigative and quasi-judicial powers, act on any complaint by or against any participant or player in the energy sector for violations of any laws, rules and regulations governing the same, including the rules on cross-ownership, anti-competitive practices and other acts of abuse of market positions by any participant or player in the energy sector, as may be provided by law, and require any person or entity to submit any report or data relative to any investigation or hearing conducted in accordance with this Act;

(t) Inspect, on its own or through duly authorized representatives, the premises, books of accounts and records of any person or entity at any time, in the exercise of its quasi-judicial power for purposes of determining the existence of any anti-competitive behavior and/or market power abuse and any violation of rules and regulations issued by the ERC;

(u) Perform such other regulatory functions as are appropriate in order to ensure the successful restructuring and modernization of the electric power industry, such as, but not limited to, the rules and guidelines under which generation companies, distribution utilities which are not publicly listed shall offer and sell to the public a portion not less than fifteen percent (15%) of their common shares of stocks: Provided, however, That generation companies, distribution utilities or their respective holding companies that are already listed in the PSE are deemed in compliance. For existing companies, such public offering shall be implemented not later than five (5) years from the effectivity of this Act. New companies shall implement their respective public offerings not later than five (5) years from the issuance of their certificate of compliance.

(v) The ERC shall have the original and exclusive jurisdiction over all cases contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the abovementioned powers, functions and responsibilities and over all cases involving disputes between and among participants or players in the energy sector. All notices of hearings to be conducted by the ERC for the purpose of fixing rates or fees shall be published at least twice for two successive weeks in two (2) newspapers of nationwide circulation.

Section 44. Transfer of Powers and Functions. - The powers and functions of the Energy Regulatory Board not inconsistent with the provisions of this Act are hereby transferred to the ERC. The foregoing transfer of powers and functions shall include all applicable funds and appropriations, records, equipment, property and personnel as may be necessary.

Section 45. Cross Ownership, Market Power Abuse And Anti-Competitive Behavior. - No participant in the electricity industry may engage in any anti-competitive behavior including, but not limited to, cross-subsidization, price or market manipulation, or other unfair trade practices detrimental to the encouragement and protection of contestable markets.

No generation company or distribution utility, or its respective subsidiary or affiliate or stockholder or official of a generation company or distribution utility, or other entity engaged in generating and supplying electricity specified by ERC shall be allowed to hold any interest, direct or indirect, in TRANSCO or its concessionaire. Likewise, the TRANSCO, or its concessionaire or any of its stockholders or officials or any of their relatives within the fourth civil degree of consanguinity or affinity, shall not hold any interest, whether direct or indirect, in any generation company or distribution utility. Except for government-appointed representatives, no person who is an officer or director of TRANSCO or its concessionaire shall be an officer or director of any generation company, distribution utility or supplier.

To promote true market competition and prevent harmful monopoly and market power abuse, the ERC shall enforce the following safeguards:

(a) Starting not later than five (5) years from the approval of this Act and until such time that the ERC has reduced the threshold level to one hundred kilowatts (100kW), no company or related group can own and operate or control and operate more than forty percent (40%) of the installed generating capacity of a grid and/or thirty percent (30%) of the national installed capacity; and

(b) Distribution utilities may enter into bilateral power supply contracts subject to review by ERC.

For purposes of this Section, the grid basis shall consist of three (3) separate grids, namely Luzon, Visayas and Mindanao. The ERC shall have the authority to modify or amend this definition of a grid when two or more of the three separate grids become sufficiently interconnected to constitute a single grid or as conditions may otherwise permit.

Exceptions from these limitations shall be allowed for isolated grids that are not connected to the high voltage transmission system. Except as otherwise provided for in this Section, any restriction on ownership and/or control between or within sectors of the electricity industry may be imposed by ERC only insofar as the enforcement of the provisions of this Section is concerned.

The ERC shall, within one (1) year from the effectivity of this Act, promulgate rules and regulations to promote competition, encourage market development and customer choice and discourage/penalize abuse of market power, cartelization and any anti-competitive or discriminatory behavior, in order to further the intent of this Act and protect the public interest. Such rules and regulations shall define the following:

(a) the relevant markets for purposes of establishing abuse or misuse of monopoly or market position;

(b) areas of isolated grids; and

(c) the periodic reportorial requirements of electric power industry participants as may be necessary to enforce the provisions of this Section.

The ERC shall, motu propio, monitor and penalize any market power abuse or anti-competitive or discriminatory act or behavior by any participant in the electric power industry.

Upon finding that a market participant has engaged in such act or behavior, the ERC shall stop and redress the same. Such remedies shall, without limitation, include the imposition of price controls, issuance of injunctions, requirement of divestment or disgorgement of excess profits and imposition of fines and penalties pursuant to this Act.

The ERC shall, within one (1) year from the effectivity of this Act, promulgate rules and regulations providing for a complaint procedure that, without limitation, provides the accused party with notice and an opportunity to be heard.

Section 46. Fines and Penalties. - The fines and penalties that shall be imposed by the ERC for any violation of or non-compliance with this Act or the IRR shall range from a minimum of Fifty thousand pesos (P50,000.00) to a maximum of Fifty million pesos (P50,000,000.00).

Any person who is found guilty of any of the prohibited acts pursuant to Section 45 hereof shall suffer the penalty of prision mayor and a fine ranging from Ten thousand pesos (P10,000.00) to Ten million pesos (P10,000,000.00), or both, at the discretion of the court.

The members of the Board of Directors of the juridical companies participating in or covered in the generation companies, the distribution utilities, the TRANSCO or its concessionaire or supplier who violate the provisions of this Act may be fined by an amount not exceeding double the amount of damages caused by the offender or by imprisonment of one year or two years or both at the discretion of the court. This rule shall apply to the members of the Board who knowingly or by neglect allows the commission or omission under the law.

If the offender is a government official or employee, he shall, in addition, be dismissed from the government service with prejudice to reinstatement and with perpetual or temporary disqualification from holding any elective or appointive office.

If the offender is an alien he may, in addition to the penalties prescribed, be deported without further proceedings after service of sentence.

Any case which involves question of fact shall be appealable to the Court of Appeals and those which involve question of law shall be directly appealable to the Supreme Court. The administrative sanction that may be imposed by the ERC shall be without prejudice to the filing of a criminal action, if warranted.

To ensure compliance with this Act, the penalty of prision correccional or a fine ranging from Five thousand pesos (P5,000.00) to Five million pesos (P5,000,000.00), or both, at the discretion of the court, shall be imposed on any person, including but not limited to the president, member of the Board, Chief Executive Officer or Chief Operating Officer of the corporation, partnership, or any other entity involved, found guilty of violating or refusing to comply with any provision of this Act or its IRR, other than those provided herein.

Any party to an administrative proceeding may, at any time, make an offer to the ERC, conditionally or otherwise for a consented decree, voluntary compliance or desistance and other settlement of the case. The offer and any or all of the ultimate facts upon which the offer is based shall be considered for settlement purposes only and shall not be used as evidence against any party for any other purpose and shall not constitute an admission by the party making the offer of any violation of the laws, rules, regulations, orders and resolutions of the ERC, nor as a waiver to file any warranted criminal actions. In addition, Congress, upon recommendation of the DOE and/or ERC, may revoke such franchise or privilege granted to the person or entity who violated the provisions of this Act.

Section 47. NPC Privatization. - Except for the assets of SPUG, the generating assets, real estate, and other disposable assets as well as generation contracts of NPC shall be privatized in accordance with this Act. Within six (6) months from the effectivity of this Act, the PSALM Corp. shall submit a plan for the endorsement by the Joint Congressional Power Commission and the approval of the President of the Philippines, on the total privatization of the generation assets, real estate, other disposable assets as well as existing generation contracts of NPC and thereafter, implement the same, in accordance with the following guidelines, except as provided for in paragraph (e) herein:

(a) The privatization value to the national government of the NPC generation assets, real estate, other disposable assets as well as IPP contracts shall be optimized;

(b) The participation by Filipino citizens and corporations in the purchase of NPC assets shall be encouraged;

In the case of foreign buyers at least seventy-five percent (75%) of the funds used to acquire NPC-generating assets and generating contracts shall be inwardly remitted and registered with the Bangko Sentral ng Pilipinas.

(c) The NPC plants, its related assets and assigned liabilities, if any, shall be grouped in a manner which shall promote the viability of the resulting generating companies (gencos), ensure economic efficiency, encourage competition, foster reasonable electricity rates and create market appeal to optimize returns to the government from the sale and disposition of such assets in a manner consistent with the objectives of this Act. In the grouping of the generating assets of NPC, the following criteria shall be considered:

(1) A sufficient scale of operations and balance sheet strength to promote the financial viability of the restructured units;

(2) Broad geographical groupings to ensure efficiency of operations but without the formation of regional companies or consolidation of market power;

(3) Portfolio of plants to achieve management and operational synergy without dominating any part of the market or of the load curve; and

(4) Such other factors as may be deemed beneficial to the best interest of the national government while ensuring attractiveness to potential investors.

(d) All generation assets and IPP contracts shall be sold in an open and transparent manner through public bidding;

(e) The Agus and the Pulangui complexes in Mindanao shall be excluded from among the generating companies that will be initially privatized. Their ownership shall be transferred to the PSALM Corp. and both shall continue to be operated by NPC. In case of privatization, said complexes may be privatized not earlier than ten (10) years from the effectivity of this Act, and, until privatized, shall not be subject to Build-Operate-Transfer (B-O-T), Build-Rehabilitate-Operate-Transfer (B-R-O-T) and other variations pursuant to Republic Act No. 6957, as amended by Republic Act No. 7718. The privatization of Agus and Pulangui complexes shall be left to the discretion of PSALM Corp. in consultation with Congress;

(f) The steamfield assets and generating plants of each geothermal complex shall not be sold separately. They shall be combined and each geothermal complex shall be sold as one package through public bidding. The geothermal complexes covered by this requirement include, but not limited to, Tiwi-Makban, Leyte A and B (Tongonan), Palinpinon, and Mt. Apo;

(g) The ownership of the Caliraya-Botokan-Kalayaan (CBK) pump storage complex shall be transferred to the PSALM Corporation and shall continue to be operated by NPC;

(h) Not later than three (3) years from the effectivity of this Act, and in no case later than the initial implementation of open access, at least seventy percent (70%) of the total capacity of generating assets of NPC and of the total capacity of the power plants under contract with NPC located in Luzon and Visayas shall have been privatized; and

(i) NPC may generate and sell electricity only from the undisposed generating assets and IPP contracts of PSALM Corp.: Provided, That any unsold capacity shall be privatized not later than eight (8) years from the effectivity of this Act.

Section 48. National Power Board of Directors. - Upon the passage of this Act, the provisions of R.A. 6395, otherwise known as the NPC Charter, referring to the composition of the National Power Board of Directors, are hereby repealed and a new Board shall be immediately organized. The new Board shall be composed of the Secretary of Finance as Chairman, with the following as members: the Secretary of Energy, the Secretary of Budget and Management, the Secretary of Agriculture, the Director-General of the National Economic and Development Authority, the Secretary of Environment and Natural Resources, the Secretary of Interior and Local Government, the Secretary of the Department of Trade and Industry, and the President of the National Power Corporation.

Section 49. Creation of Power Sector Assets and Liabilities Management Corporation. - There is hereby created a government owned and controlled corporation to be known as the "Power Sector Assets and Liabilities Management Corporation", hereinafter referred to as the "PSALM Corp.", which shall take ownership of all existing NPC generation assets, liabilities, IPP contracts, real estate and all other disposable assets. All outstanding obligations of the National Power Corporation arising from loans, issuances of bonds, securities and other instruments of indebtedness shall be transferred to and assumed by the PSALM Corp. within ninety (90) days from the approval of this Act.

Section 50. Purpose and Objective, Domicile and Term of Existence. - The principal purpose of the Corporation is to manage the orderly sale, disposition, and privatization of NPC generation assets, real estate and other disposable assets, and IPP contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner.

The Corporation shall have its principal office and place of business within Metro Manila.

The Corporation shall exist for a period of twenty five (25) years from the effectivity of this Act, unless otherwise provided by law, and all assets held by it, all moneys and properties belonging to it, and all its liabilities outstanding upon the expiration of its term of existence shall revert to and be assumed by the National Government.

Section 51. Powers. - The Corporation shall, in the performance of its functions and for the attainment of its objective, have the following powers:

(a) To formulate and implement a program for the sale and privatization of the NPC assets and IPP contracts and the liquidation of NPC debts and stranded contract costs, such liquidation to be completed within the Corporation's term of existence;

(b) To take title to and possession of, administer and conserve the assets and IPP contracts transferred to it; to sell or dispose of the same at such price and under such terms and conditions as it may deem necessary or proper, subject to applicable laws, rules and regulations;

(c) To calculate the amount of the stranded debts and stranded contract costs of NPC which shall form the basis for ERC in the determination of the universal charge;

(d) To liquidate the NPC stranded contract costs utilizing proceeds from sales and other property contributed to it, including the proceeds from the universal charge;

(e) To adopt rules and regulations as may be necessary or proper for the orderly conduct of its business or operations;

(f) To sue and be sued in its name;

(g) To appoint or hire, transfer, remove and fix the compensation of its personnel; Provided, however, That the Corporation shall hire its own personnel only if absolutely necessary, and as far as practicable, shall avail itself of the services of personnel detailed from other government agencies;

(h) To own, hold, acquire, or lease real and personal properties as may be necessary or required in the discharge of its functions;

(i) To borrow money and incur such liabilities, including the issuance of bonds, securities or other evidences of indebtedness utilizing its assets as collateral and/or through the guarantees of the National Government: Provided, however, That all such debts or borrowings shall have been paid off before the end of its corporate life;

(j) To restructure existing loans of NPC;

(k) To collect, administer, and apply NPC's portion of the universal charge;

(l) To relend to NPC successor gencos and TRANSCO such amounts on such terms and conditions which shall optimize the value and sale prices of said assets.

Section 52. Power Sector Assets and Liabilities Management Corporation, Meetings, Quorum and Voting. - The Corporation shall be administered, and its powers and functions exercised, by a Board of Directors which shall be composed of the Secretary of Finance as the Chairman, the Secretary of Budget and Management, the Secretary of the Department of Energy, the Director-General of the National Economic and Development Authority, the Secretary of the Department of Justice, the Secretary of the Department of Trade and Industry and the Secretary of the Department of Agriculture as ex-officio members thereof.

The Board of Directors shall meet regularly and as frequently as may be necessary to enable it to discharge its functions and responsibilities. The presence at a meeting of four (4) members shall constitute a quorum, and the decision of the majority of three members present at a meeting where there is quorum shall be the decision of the Board of Directors.

Section 53. Powers of the President of PSALM Corp. - The President of PSALM Corp. shall be appointed by the President of the Philippines. In the absence of the Chairman, the President shall preside over Board meetings. The PSALM Corp. President shall be the Chief Executive Officer of PSALM Corp.

The President of PSALM Corp. shall have the following powers and duties:

(a) To execute and administer the policies and measures approved by the Board, and take responsibility for the efficient discharge of management functions;

(b) To oversee the preparation of the budget of PSALM Corp.;

(c) To direct and supervise the operation and internal administration of PSALM Corp. and, for this purpose, may delegate some or any of his administrative responsibilities and duties to other officers of PSALM Corp;

(d) Subject to the guidelines and policies set up by the Board, to appoint and fix the number and compensation of subordinate officials and employees of PSALM Corp; and for cause, to remove, suspend, or otherwise discipline any subordinate employee of PSALM Corp;

(e) To submit an annual report to the Board on the activities and achievements of PSALM Corp. at the close of each fiscal year and upon approval thereof, submit a copy to the President of the Philippines and to such other agencies as may be required by law;

(f) To represent PSALM Corp. in all dealings and transactions with other offices, agencies, and instrumentalities of the Government and with all persons and other entities, private or public, domestic or foreign; and

(G) To exercise such other powers and duties as may be vested in him by the Board from time to time.

Section 54. Exemption from the Salary Standardization Law. - The salaries and benefits of employees in the PSALM Corp. shall be exempt from Republic Act No. 6758 and shall be fixed by the PSALM Corp. Board.

Section 55. Property of the PSALM Corp. - The following funds, assets, contributions and other property shall constitute the property of the PSALM Corp.:

(a) The generation assets, real estate, IPP contracts, other disposable assets of NPC, proceeds from the sale or disposition of such assets and the residual assets from B-O-T, R-O-T, and other variations thereof;

(b) Transfers from the national government;

(c) Proceeds from loans incurred to restructure or refinance NPC's transferred liabilities: Provided, however, That all borrowings shall be fully paid for by the end of the life of the PSALM Corp.;

(d) Proceeds from the universal charge allocated for stranded contract costs and the stranded debts of NPC;

(e) Net profit of NPC;

(f) Net profit of TRANSCO;

(g) Official assistance, grants, and donations from external sources; and

(h) Other sources of funds as may be determined by PSALM Corp. necessary for the above-mentioned purposes.

Section 56. Claims Against the PSALM Corp. - The following shall constitute the claims against the PSALM Corp.:

(a) NPC liabilities transferred to the PSALM Corp.;

(b) Transfers from the national government;

(c) New loans; and

(d) NPC stranded contract costs.

Section 57. Conversion of Electric Cooperatives. -Electric cooperatives are hereby given the option to convert into either stock cooperative under the Cooperatives Development Act or stock corporation under the Corporation Code. Nothing contained in this Act shall deprive electric cooperatives of any privilege or right granted to them under existing laws, particularly those under the provisions of Republic Acts No. 6938, 7160 and 8241

Section 58. Additional Mandate of the National Electrification Administration (NEA). - NEA shall develop and implement programs:

(a) To prepare electric cooperatives in operating and competing under the deregulated electric market within five (5) years from the effectivity of this Act, specifically in an environment of open access and retail wheeling

(b) To strengthen the technical capability and financial viability of rural electric cooperatives; and

(c) To review and upgrade regulatory policies with a view to enhancing the viability of rural electric cooperatives as electric utilities.

NEA shall continue to be under the supervision of the DOE and shall exercise its functions under Presidential Decree No. 269, as amended by Presidential Decree No. 1645 insofar as they are consistent with this Act.

Section 59. Alternative Electric Service for Isolated Villages. - The provision of electric service in remote and unviable villages that the franchised utility is unable to service for any reason shall be opened to other qualified third parties.

Section 60. Debts of Electric Cooperatives. - Upon the effectivity of this Act, all outstanding financial obligations of electric cooperatives to NEA and other government agencies incurred for the purpose of financing the rural electrification program shall be assumed by the PSALM Corp. The ERC shall ensure a reduction in the rates of electric cooperatives commensurate with the resulting savings due to the removal of the amortization payments of their loans. Within five (5) years from the condonation of debt, any electric cooperative which shall transfer ownership or control of its assets, franchise or operations thereof shall repay PSALM Corp. the total debts including accrued interests thereon.

Section 61. Reportorial Requirements. -The DOE shall take the necessary measures to ensure that the provisions of this Act are properly implemented, and shall submit to the Power Commission a semi-annual report on the implementation of this Act, which shall be on or before the last week of April and October of each year.

Section 62. Joint Congressional Power Commission. - Upon the effectivity of this Act, a congressional commission, hereinafter referred to as the Power Commission, is hereby constituted. The Power Commission shall be composed of fourteen (14) members WITH the chairmen of the Committee on Energy of the Senate and the House of Representatives and six (6) additional members from each House, to be designated by the Senate President and the Speaker of the House of Representatives, respectively. The minority shall be entitled to pro-rata representation but shall have at least one (1) representative in the Power Commission.

The Commission shall, in aid of legislation, perform the following functions, among others:

(a) Set the guidelines and overall framework to monitor and ensure the proper implementation of this Act;

(b) Approve genco groupings, IPP groupings, and sequencing of sale of gencos;

(c) Endorse the privatization plan prepared by PSALM for approval of the President of the Philippines;

(d) To ensure transparency, require the submission of reports from government agencies concerned on the conduct of public bidding procedures regarding privatization of NPC generating and transmission assets before any final award is made;

(e) Review and evaluate the performance of the industry participants in relation to the objectives and timelines set forth in this Act;

(f) Approve the budget for the programs of the Power Commission and all disbursements therefrom, including compensation of all personnel;

(g) Submit periodic reports to the President of the Philippines and Congress;

(h) Determine inherent weaknesses in the law and recommend necessary remedial legislation or executive measures; and

(i) Perform such other duties and functions as may be necessary to attain its objectives.

In furtherance hereof, the Power Commission is hereby empowered to require the DOE, ERC, NEA, TRANSCO, generation companies, distribution utilities, suppliers and other electric power industry participants to submit reports and all pertinent data and information relating to the performance of their respective functions in the industry. Any person who willfully and deliberately refuses without just cause to extend the support and assistance required by the Power Commission to effectively attain its objectives shall, upon conviction, be punished by imprisonment of not less than one (1) year but not more than six (6) years or a fine of not less than Fifty thousand pesos (P50,000.00) but not more than Five hundred thousand pesos (P500,000.00) or both at the discretion of the court.

The Power Commission shall adopt its internal rules of procedures; conduct hearings and receive testimonies, reports and technical advice; invite or summon by subpoena ad testificandum any public official, private citizen or any other person to testify before it, or require any person by subpoena duces tecum to produce before it such records, reports, documents or other materials as it may require; and generally require all the powers necessary to attain the purposes for which it is created. The Power Commission shall be assisted by a secretariat to be composed of personnel who may be seconded from the Senate and the House of Representatives and may retain consultants. The secretariat shall be headed by an executive director who has sufficient background and competence on the policies and issues relating to electricity industry reforms as provided in this Act. To carry out its powers and functions, the initial sum of twenty- five million pesos (P25,000,000.00) shall be charged against the current appropriations of the Senate. Thereafter, such amount necessary for its continued operation shall be included in the annual General Appropriations Act.

The Power Commission shall exist for period of ten (10) years from the effectivity of this Act and may be extended by a joint concurrent resolution.

Section 63. Separation Benefits of Officials and Employees of Affected Agencies. - National government employees displaced or separated from the service as a result of the restructuring of the electricity industry and privatization of NPC assets pursuant to this Act, shall be entitled to a separation pay and other benefits in accordance with existing laws, rules or regulations. Displaced or separated personnel as a result of the privatization, if qualified, shall be given preference in the hiring of the manpower requirements of the privatized companies.

All employees of NPC affected by the passage of this Act shall be entitled to avail of the privileges provided under the NPC separation plan existing as of January 1, 2001.

The salaries of employees of NPC shall continue to be exempt from the coverage of Republic Act No. 6758, otherwise known as "The Salary Standardization Act".

With respect to employees who are not retained by NPC, the government, through the Department of Labor and Employment, shall endeavor to implement re-training, job counseling, and job placement programs.

Section 64. Fiscal Prudence - To promote the prudent management of government resources, the creation of new positions and the levels of or increases in salaries and all other emoluments and benefits of TRANSCO and PSALM Corp. personnel shall be subject to the approval of the President of the Philippines. The compensation and all other emoluments and benefits of the officials and members of the Board of TRANSCO and PSALM Corp. shall be subject to the approval of the President of the Philippines.

Section 65. Environmental Protection. - Participants in the generation, distribution and transmission sub-sectors of the industry shall comply with all environmental laws, rules, regulations and standards promulgated by the Department of Environment and Natural Resources including, in appropriate cases, the establishment of an environmental guarantee fund.

Section 66. Benefits to Host Communities. - The obligations of generating companies and energy resource developers to communities hosting energy generating facilities and/or energy resource developers as defined under Chapter II, Sections 289 to 294 of the Local Government Code and Section 5(i) of Republic Act No. 7638 and their implementing rules and regulations and applicable orders and circulars consistent with this Act shall continue: Provided, further, That the obligations mandated under Chapter II, Section 291 of Republic Act No. 7160, shall apply to privately-owned corporations or entities utilizing the national wealth of the locality.

To ensure the effective implementation of the reduction in cost of electricity in the communities where the source of energy is located, the mechanics and procedures prescribed in the Department of the Interior and Local Government (DILG)-DOE Circulars No. 95-01 and 98-01 dated October 31, 1995 and September 30, 1998, respectively and other issuances related thereto shall be pursued.

Towards this end, the fund generated from the eighty percent (80%) of the national wealth tax shall, in no case, be used by any local government unit for any purpose other than those for which it was intended.

In case of any violation or noncompliance by any local government official of any provision thereof, the DILG shall, upon prior notice and hearing, order the project operator, through the DOE, to withhold the remittance of the royalty payment to the host community concerned pending completion of the investigation. The unremitted funds shall be deposited in a government bank under a trust fund.

Section 67. NPC Offer of Transition Supply Contracts. - Within six (6) months from the effectivity of this Act, NPC shall file with the ERC for its approval a transition supply contract duly negotiated with the distribution utilities containing the terms and conditions of supply and a corresponding schedule of rates, consistent with the provisions hereof, including adjustments and/or indexation formulas which shall apply to the term of such contracts. The term of the transition supply contracts shall not extend beyond one year from the introduction of open access. Such contracts shall be based on the projected demand of such utilities less any of their currently committed quantities under eligible IPP contracts as defined in Section 33 hereof:

Provided, That the total generation capacity of such signed transition supply contracts shall not exceed the level of NPC owned, controlled or committed capacity as of the effectivity of this Act. Such transition supply contracts shall be assignable to the NPC successor generating companies. Within six (6) months from the date of submission of the transition supply contract by NPC, the ERC shall notify NPC of their approval of the rates contained therein.

The ERC shall maintain a record of the contract terms and rates offered by NPC. Likewise, the ERC shall update monthly, the rates using the appropriate adjustment and/or indexation formula. Notwithstanding the provisions of Section 25 hereof, the rates charged by a distribution utility for the generation component of the supply of electricity in their distribution retail supply rate shall, for the term of the transition supply contracts, not exceed the transition supply contract rates, as updated monthly. The recovery of costs incurred by a distribution utility for any generation component in excess of the transition supply contract rates shall be disallowed by the ERC, except for eligible contracts as defined under Section 33 hereof: Provided, That such limitation on the recovery of generation component costs by a distribution utility shall apply only to the equivalent quality and quantity of electricity still available to the distribution utility from NPC.

Section 68. Power Supply Agreement. - It shall be a condition of the privatization of NPC that PSALM Corp. shall diligently seek reasonable mitigating steps to correct onerous provisions on its generating contracts, guaranteed by government specially independent power producers, where NPC is experiencing substantial losses as a result of excessive price, chronic underutilization, inappropriate fee structure, or buy-out provisions that exceed levels needed for fair return on investment.

The NPC shall sell electricity only from undisposed generation assets and IPP contracts and shall not incur any new obligations to purchase power through bilateral contracts with generation companies or other suppliers. NPC shall act as the administrator of IPP contracts.

Section 69. Renegotiation of Power Purchase and Energy Conversion Agreements between Government Entities. - Within three (3) months from the effectivity of this Act, all power purchase and energy conversion agreements between the PNOC-Energy Development Corporation (PNOC-EDC) and NPC, including but not limited to the Palimpinon, Tongonan and Mt. Apo Geothermal complexes, shall be reviewed by the ERC and the terms thereof amended to remove any hidden costs or extraordinary mark-ups in the cost of power or steam above their true costs. All amended contracts shall be submitted to the Joint Congressional Power Commission for approval. The ERC shall ensure that all savings realized from the reduction of said mark-ups shall be passed on to all end-users.

Section 70. Missionary Electrification. - Notwithstanding the divestment and/or privatization of NPC assets, IPP contracts and spun-off corporations, NPC shall remain as a National Government-owned and -controlled corporation to perform the missionary electrification function through the Small Power Utilities Group (SPUG) and shall be responsible for providing power generation and its associated power delivery systems in areas that are not connected to the transmission system. The missionary electrification function shall be funded from the revenues from sales in missionary areas and from the universal charge to be collected from all electricity end-users as determined by the ERC.

Section 71. Electric Power Crisis Provision - Upon the determination by the President of the Philippines of an imminent shortage of the supply of electricity, Congress may authorize, through a joint resolution, the establishment of additional generating capacity under such terms and conditions as it may approve.

Section 72. Mandated Rate Reduction. - Upon the effectivity of this Act, residential end-users shall be granted a rate reduction from NPC rates of thirty centavos per kilowatt-hour (P0.30/kWh). Such reduction shall be reflected as a separate item in the consumer billing statement.

Section 73. Lifeline Rate. — A socialized pricing mechanism called a lifeline rate for the marginalized end-users shall be set by the ERC, which shall be exempted from the cross subsidy phase-out under this Act for a period of twenty (20) years, unless otherwise extended by law. The level of consumption and the rate shall be determined by the ERC after due notice and hearing. (Extending the Implementation of the Lifeline Rate, Amending R.A. No. 9136 (Electric Power Industry Reform Act of 2001), Republic Act No. 10150, [June 21, 2011])

Section 74. Cross Subsidies. - Cross subsidies within a grid, between grids and/or classes of customers shall be phased out in a period not exceeding three (3) years from the establishment by the ERC of a universal charge which shall be collected from all electricity end-users. Such level of cross subsidies shall be made transparent and identified separately in the billing statements provided to end-users by the suppliers or by the DOE as the case may be.

The ERC may extend the period for the removal of cross subsidies for a maximum period of one (1) year upon finding that cessation of such mechanism would have a material adverse effect upon the public interest, particularly the residential end-user; or would have an immediate, irreparable, and adverse financial effect on distribution utility.

Section 75. Statutory Construction. - This Act shall, unless the context indicates otherwise, be construed in favor of the establishment, promotion, preservation of competition and people empowerment so that the widest participation of the people, whether direct or indirect, is ensured.

Section 76. Education and Protection of End Users. - End users shall be educated about the implementation of retail access and its impact on end-users and on the proper use of electric power. Such education shall include, but not limited to, the existence of competitive electricity suppliers, choice of competitive electricity services, regulated transmission and distribution services, systems reliability, aggregation, market, itemized billing, stranded cost, uniform disclosure requirements, low-income bill payment, energy conservation and safety measures. The DOE, in coordination with the NPC, NEA, ERC and the Office of the Press Secretary-Philippine Information Agency (OPS-PIA), shall undertake an information campaign to educate the public on the restructuring of the electric power industry and privatization of NPC.

Section 77. Implementing Rules and Regulations. - The DOE shall, in consultation with the electric power industry participants and end-users, promulgate the Implementing Rules and Regulations (IRR) of this Act within six (6) months from the effectivity of this Act, subject to the approval by the Power Commission.

Section 78. Injunction and Restraining Order. - The implementation of the provisions of this Act shall not be restrained or enjoined except by an order issued by the Supreme Court of the Philippines.

Section 79. Separability Clause. - If for any reason, any provision of this Act is declared unconstitutional or invalid, the other parts or provisions hereof which are not affected thereby shall continue to be in full force and effect.

Section 80. Applicability and Repealing Clause. - The applicability provisions of Commonwealth Act No. 146, as amended, otherwise known as the "Public Services Act"; Republic Act 6395, as amended, revising the charter of NPC; Presidential Decree 269, as amended, referred to as the NEA decree; Republic Act 7638, otherwise known as the "Department of Energy Act of 1992"; Executive Order 172, as amended, creating the ERB; Republic Act 7832 otherwise known as the "Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994", shall continue to have full force and effect except in so far as inconsistent with this Act.

Presidential Decree No. 40 and all laws, decrees, rules and regulations, or portions thereof, inconsistent with this Act are hereby repealed or modified accordingly.

Section 81. Effectivity Clause. - This Act shall take effect on the fifteenth day following its publication in at least two (2) national papers of general circulation.

February 10, 1998

AN ACT DEREGULATING THE DOWNSTREAM OIL INDUSTRY AND FOR OTHER PURPOSES

• See IRR here

• See IRR Amending Section 14

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

CHAPTER I General Provisions

Section 1. Short Title. – This Act shall be known as the "Downstream Oil Industry Deregulation Act of 1998."

Section 2. Declaration of Policy. – It shall be the policy of the State to liberalize and deregulate the downstream oil industry in order to ensure a truly competitive market under a regime of fair prices, adequate and continuous supply of environmentally-clean and high-quality petroleum products. To this end, the State shall promote and encourage the entry of new participants in the downstream oil industry, and introduce adequate measures to ensure the attainment of these goals.

Section 3. Coverage. –This Act shall apply to all persons or entities engaged in any and all activities of the domestic downstream oil industry, as well as persons or companies directly importing refined petroleum products for their own use.

Section 4. Definition of Terms. – For purposes of this Act, the following terms are hereinbelow defined:

(a) Basel Convention shall refer to the international accord which governs the trade or movement of hazardous and toxic wastes across borders;

(b) Board shall refer to the Energy Regulatory Board;

(c) BOI shall refer to the Board of Investments;

(d) Crude Oil shall refer to oil in its natural state before the same has been refined or otherwise treated, but excluding water, bottoms, sediments and foreign substances;

(e) Dealer shall refer to any person, whether natural or juridical, who is engaged I the marketing and direct selling of petroleum products to motorists, end users, and other consumers;

(f) DOE shall refer to the Department of Energy;

(g) DOJ shall refer to the Department of Justice;

(h) Downstream Oil Industry(DOI) or Industry shall refer to the business of importing; exporting, re-exporting, shipping, transporting, processing, refining, storing, distributing, marketing and/or selling crude oil, gasoline, diesel, liquefied petroleum gas (LPG), kerosene, and other petroleum products;

(i) Hauler shall refer to any person, whether natural or juridical, engaged in the transport, distribution, hauling, and carriage of petroleum products, whether in bulk or packed form, from the oil companies and independent marketers to the petroleum dealers and other consumers;

(j) LPG Distributor shall refer to any person or entity, whether natural or juridical, engaged in exporting, refilling, transporting, marketing, and/or selling of LPG to end users and other consumers;

(k) New Industry Participants shall refer to new participants in a particular sub-sector of the downstream oil industry with investments and initial business operations commencing after January 1, 1994;

(l) Person shall refer to any person, whether natural or juridical, who is engaged in any activity of the downstream oil industry;

(m) Petroleum shall refer to the naturally occurring mixture of compounds of hydrogen and carbon with a small proportion of impurities and shall include any mineral oil, petroleum gas, hydrogen gas, bitumen, asphalt, mineral wax, and all other similar or naturally-associated substances, with the exception of coal, peat, bituminous shale and/or other stratified mineral fuel deposits;

(n) Petroleum Products shall refer to products formed in the case of refining crude petroleum through distillation, cracking, solvent refining and chemical treatment coming out as primary stocks from the refinery such as, but not limited to: LPG, naphtha, gasolines, solvents, kerosene, aviation fuels, diesel oils, fuel oils, waxes and petrolatum, asphalt, bitumen, coke and refinery sludges, or other such refinery petroleum fractions which have not undergone any process or treatment as to produce separate chemically-defined compounds in a pure or commercially pure state and to which various substances may have been added to render them suitable for particular uses: Provided, That the resultant product contains not less than fifty percent (50%) by weight of such petroleum products;

(o) Singapore Import Parity(SIP) shall refer to the deemed landed cost of a petroleum product imported from Singapore at a free-on-board price equal to the average Singapore Posting for that product at the time of loading;

(p) Singapore Posting shall refer to the price of petroleum products periodically posted by oil refineries in Singapore and reported by independent international publications; and

(q) Wholesale Posted Price (WPP) shall refer to the ceiling price of petroleum products set by the Board based on its duly approved automatic pricing formula.

CHAPTER II Liberalization of the Downstream Oil Industry and the Promotion of Free Competition

Section 5. Liberalization of the Industry. – Any law to the contrary notwithstanding, any person or entity may import or purchase any quantity of crude oil and petroleum products from a foreign or domestic source, lease or own and operate refineries and other downstream oil facilities and market such crude oil and petroleum products either in a generic name or his or its own trade name, or use the same for his or its own requirement: Provided, That any person who shall engage in any such activity shall give prior notice thereof to the DOE for monitoring purposes: Provided, further, That such notice shall exempt such person or entity from securing certificates of quality, health and safety and environmental clearance from the proper governmental agencies: Provided, furthermore, That such person or entity shall, for monitoring purposes, report to the DOE his or its every importation/exportation: Provided, finally, That all oil importations shall be in accordance with the Basel Convention.

Section 6. Tariff Treatment. – (a) Any law to the contrary notwithstanding and starting with the effectivity of this Act, a single and uniform tariff duty shall be imposed and collected both on imported crude oil and imported refined petroleum products at the rate of three percent (3%): Provided, however, That the President of the Philippines may, in the exercise of his powers, reduce such tariff rate when in his judgment such reduction is warranted, pursuant to Republic Act No. 1937, as amended, otherwise known as the Tariff and Customs Code: Provided, further, That beginning January 1, 2004 or upon implementation of the Uniform Tariff Program under the World Trade Organization and ASEAN Free Trade Area commitments, the tariff rate shall be automatically adjusted to the appropriate level notwithstanding the provisions under this Section.

(b) For as long as the National Power Corporation (NPC) enjoys exemptions from taxes and duties on petroleum products used for power generation, the exemption shall apply to purchases through the local refineries and to the importation of fuel oil and diesel.

Section 7. Promotion of Fair Trade Practices. – The Department of Trade and Industry (DTI) and DOE shall take all measures to promote fair trade and prevent cartelization, monopolies, combinations in restraint of trade, and any unfair competition in the Industry as defined in Article 186 of the Revised Penal Code, and Articles 168 and 169 of Republic Act No. 8293, otherwise known as the "Intellectual Property Law". The DOE shall continue to encourage certain practices in the industry which continue to encourage certain practices in the Industry which serve the public interest and are intended to achieve efficiency and cost reduction, ensure continuous supply of petroleum products, and enhance environmental protection. These practices may include borrow-and-loan agreements, rationalized depot and manufacturing operations, hospitality agreements, joint tanker and pipeline utilization, and joint actions on spill control and fire prevention.

The DOE shall monitor the relationship between the oil companies (refiners and importers) and their dealers, haulers and LPG distributors to help ensure the observance of fair and equitable practices and to ensure the enforcement of existing contracts: Provided, That the DOE shall conciliate and arbitrate any dispute that may arise with respect to the contractual relationship between the oil companies and the dealers, haulers and LPG distributors involving the dealers' mark-up, the freight rate in transporting petroleum products and the margins of LPG distributors for the protection of the public and to prevent ruinous competition: Provided, further, That the arbitration award of the DOE shall be subject to judicial review under existing law.

Section 8. Program to Encourage the Entry of New Participants in the Industry. – The DOE, the Department of Foreign Affairs (DFA) and the DTI shall jointly formulate and establish a program that will promote the entry of new participants in the Industry. Such program shall, among others, include a strategic international information campaign to be implemented through selected embassies and consular offices of the Philippines. This program shall commence implementation after three (3) months from the effectivity of this Act.

In this regard, the DOE shall provide a "Philippine Downstream Oil Industry Investment Guide" to new industry participants and prospective participants. This guide, shall, among others, contain:

(a) An introduction to the Philippine Downstream Oil Industry and the government's unwavering commitment to deregulation;

(b) The entry requirements;

(c) Information on the benefits and incentives for new industry participants which shall specify: (i) all the incentives and benefits they can enjoy, and (ii) the procedural and substantive requirements needed for entitlement; and

(d) Such other information the DOE may deem necessary to promote the entry of new participants.

Section 9. Incentives for New Investments. – To the extent applicable, persons with new investments as determined by the DOE and registered with the BOI in refining, storage, marketing and distribution of petroleum products, shall be extended the same incentives granted to BOI-registered enterprises engaged in a preferred area of investments pursuant to Executive Order No. 226, otherwise known as the "Omnibus Investments Code of 1987".

Such incentives shall include:

(1) Income tax holiday;

(2) Additional deduction for labor expenses;

(3) Minimum tax and duty of three percent (3%) and value-added tax (VAT) on imported capital equipment;

(4) Tax credit on domestic capital equipment;

(5) Exemption from contractor's tax;

(6) Unrestricted use of consigned equipment;

(7) Exemption from the real property tax on production equipment or machineries;

(8) Exemption from taxes and duties on imported spare parts; and

(9) Such other applicable incentives under Article 39 of Executive Order No. 226.

Any provision of the law to the contrary notwithstanding, the said incentives may be availed by persons with new investments for a period of five (5) years from registration with the BOI: Provided, however, That in the storage, marketing and distribution of petroleum products, only the investments of new industry participants shall be entitled to incentives provided in the said Code. As used herein, "marketing of petroleum products" shall include the establishment of gasoline stations.

For this purpose, the industry shall be included in the annual Investment Priorities Plan (IPP): Provided, That nothing in herein contained shall preclude qualified persons or entities as provided under the "Omnibus Investments Code" from applying from or continue enjoying incentives and benefits under the said Code.

Section 10. Promotion of Retail Competition. – To achieve the social and policy objective of fair prices, facilitate the attainment of a truly competitive product market in the retail level, the DOE shall promote and encourage by way of information dissemination, networking, and management/skills training, the active and direct participation of the private sector and cooperatives in the retailing of petroleum products through joint venture/supply agreements with new industry participants for the establishment and operation of gasoline stations: Provided, That the training herein shall include LPG retailing.

To this end, the DOE shall, in accordance with the Technology and Livelihood Resource Center (TLRC) and Technical Education and Skills Development Authority (TESDA), coordinate with new industry participants and existing petroleum dealers' associations in the formulation and implementation of a two-fold program on management and skills training for the establishment, operation, and maintenance of gasoline stations.

Persons who successfully complete the two-fold program shall be entitled to government assistance being extended by government lending agencies, in the form of medium- to long-term loans with low interest rates and to the gasoline training station training and loan fund provided hereunder, to serve as capital for the establishment and operation of gasoline stations.

For these purposes, there is hereby established a gasoline station and loan fund with the initial amount of Three hundred million pesos (P 300,000,000.00) to be provided by the Philippine Amusement and Gaming Corporation (PAGCOR) and administered by the DOE under a separate account.

Of this amount, two percent (2%) plus any additional funding shall be allocated for he two-fold program; one percent (1%) plus any additional funding shall be set aside for administrative, maintenance, and other operating expenses; ninety-four percent (94%) shall be used exclusively for lending and financial assistance; the remaining three percent (3%) shall be utilized in accordance with the provisions of Section 26 of this Act: Provided, That the loans to be awarded herein shall be from short- to medium-term with low interest rates; Provided, further, That these loans shall be awarded to qualified persons who are able to comply with the conditions set forth in the next two (2) preceding paragraphs.

CHAPTER III Anti-Trust Safeguards, Other Prohibited Acts and Remedies

Section 11. Anti-Trust Safeguards. – To ensure fair competition and prevent cartels and monopolies in the Industry, the following acts are hereby prohibited:

(a) Cartelization which means any agreement, combination or concerted action by refiners, importers and/or dealers, or their representatives, to fix prices, restrict outputs or divide markets, either by products or by areas, or allocate markets, either by products or by areas, in restraint of trade or free competition, including any contractual stipulation which prescribes pricing levels and profit margins;

(b) Predatory pricing which means selling or offering to sell any oil product at a price below the seller's or offeror's average variable cost for the purpose of destroying competition, eliminating a competitor or discouraging a potential competitor from entering the market: Provided, however, That pricing below average variable cost in order to match the lower price of the competitor and not for the purpose of destroying competition shall not be deemed predatory pricing. For purposes of this provision, "variable cost" as distinguished from "fixed cost", refers to costs such as utilities or raw materials, which vary as the output increases or decreases and "average variable cost" refers to the sum of all variable costs divided by the number of units of outputs.

Any person, including but not limited to the chief operating officer, chief executive officer or chief finance officer of the partnership, corporation or any entity involved, who is found guilty of any of the said prohibited acts shall suffer the penalty of three (3) to seven (7) years imprisonment, and a fine ranging from One million pesos (P 1,000,0000.00) to Two million pesos (P 2,000,000.00).

Section 12. Other Prohibited Acts. – To ensure compliance with the provisions of this Act, the refusal to comply with any of the following shall likewise be prohibited:

(a) submission of any reportorial requirements;

(b) use of clean and safe (environment and worker-benign) technologies;

(c) any order or instruction of the DOE Secretary issued in the exercise of his enforcement powers under Section 15 of this Act; and

(d) registration of any fuel additive with the DOE prior to its use as an additive.

Any person, including but not limited to the chief operating officer or chief executive officer of the partnership, corporation or any entity involved, who is found guilty of any of the said prohibited acts shall suffer the penalty of imprisonment for two (2) years and a fine ranging from Two hundred fifty thousand pesos (P 250,000.00) to Five hundred thousand pesos (P 500,000.00).

• See Guidelines Implementing the Registration of Fuel Additives here

Section 13. Remedies. – (a) Government Action. – Whenever it is determined by the Joint Task Force created under Section 14 (d) of this Act, there is a threatened or imminent or actual violation of Section 11 of this Act, it shall direct the provincial or city prosecutors having jurisdiction to institute an action to prevent or restrain such violation with the Regional Trial Court of the place where the defendants reside or has his place of business. Pending hearing of the complaint and before final judgment, the court may at any time issue a temporary restraining order or an injunction as shall be deemed just within the premises, under the same conditions and principles as injunctive relief is granted under the Rules of Court.

Whenever it is determined by the Joint Task Force that the Government or any of its instrumentalities or agencies, including government-owned or –controlled corporations, shall suffer loss or damage in its business or property by reason of violation of Section 11 of this Act, such instrumentality, agency or corporation may file an action to recover damages and the costs of the suit with the Regional Trial Court which has jurisdiction as provided above.

(b) Private Complaint. – Any person or entity shall report any violation of Section 11 of this Act to the Joint Task Force. The Joint Task Force shall investigate such reports in aid of which the DOE Secretary may exercise the powers under Section 15 of this Act. The Joint Task Force shall prepare a report embodying its findings and recommendations as a result of any such investigation, and the report shall be made at the discretion of the Joint Task Force. In the event that the Joint Task Force determines that there has been a violation of Section 11 of this Act, the private person or entity shall be entitled to sue for and obtain injunctive relief, as well as damages, in the Regional Trial Court having jurisdiction over any of the parties, under the same conditions and principles as injunctive relief is granted under the Rules of Court.

CHAPTER IV Powers and Functions of the DOE and the DOE Secretary

Section 14. Monitoring. – (a) The DOE shall monitor and publish daily international crude oil prices, as well as follow the movements of domestic oil prices. It shall likewise monitor the quality of petroleum products and stop the operation of businesses involved in the sale of petroleum products which do not comply with the national standards of quality that are aligned with the national standards/protocols of quality. The Bureau of Product Standards of the DTI, together with the Department of Environment and Natural Resources (DENR), the DOE, the Department of Science and Technology (DOST), representatives of the fuel and automotive industries and the consumers, shall set the specifications for all types of fuel and fuel-related products to improve fuel composition for increased efficiency and reduced emissions. The BPS shall also specify the allowable content of additives in all types of fuels and fuel-related products.

(b) The DOE shall monitor the refining and manufacturing processes of local petroleum products to ensure that clean and safe (environment and worker-benign) technologies are applied. This shall also apply to the process of marketing local and imported petroleum products.

(c) The DOE shall maintain a periodic schedule of present and future total industry inventory of petroleum products for the purpose of determining the level of supply. To implement this, the importers, refiners, and marketers are hereby required to submit monthly to the DOE their actual importations, local purchases, sales and/or consumption, and inventory on a per crude/product basis.

(d) Any report from any person of an unreasonable rise in the prices of petroleum products shall be immediately acted upon. For this purpose, the creation of the DOE-DOJ Task Force is hereby mandated to determine within thirty (30) days the merits of the report and initiate the necessary actions warranted under the circumstance: Provided, That nothing herein shall prevent the said task force from investigating and/or filing the necessary complaint with the proper court or agency motu propio.

Upon the effectivity of this Act, the Secretaries of Energy and Justice shall jointly appoint the members of a committee who shall be tasked with the drafting of the rules and guidelines to be adopted by the Task Force in the performance of its duty. These guidelines shall ensure the efficiency, promptness, and effectiveness in the handling of its cases. The Task Force shall be organized and its members appointed within one (1) month from the effectivity of this Act.

(e) In times of national emergency, when the public interest so requires, the DOE may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any person or entity engaged in the Industry.

Section 15. Additional Powers of the DOE Secretary. – In connection with the enforcement of this Act, the DOE Secretary shall have the following powers:

(a) To gather and compile appropriate information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any person or entity in the Industry;

(b) To require, by general or special orders, persons or entities engaged in a particular activity of the industry: (i) to file an annual or special report, or both in such form as the Secretary may prescribe; or (ii) to answer specific questions in writing, furnishing to the Secretary such information as he may require as to the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals of the respective persons or entities filing such reports or answer. Such reports and/or answer shall be filed with the Secretary under oath and within such reasonable time as the Secretary may prescribe;

(c) Upon the direction of the President or either House of Congress, to investigate and report the facts relating to any alleged violation of this Act by any person or corporation;

(d) Upon the application of the Secretary of Justice, to investigate and make recommendations for the readjustment of the business of any person or entity alleged to be violating this Act in order that such person or entity may thereafter maintain his or its organization, management, and conduct of business in accordance with law;

(e) To recommend to the proper government agency the suspension or revocation and termination of the business permit of an offender;

(f) Concomitant with the policy of ensuring a continuous, adequate and economic supply of energy to exercise his powers and functions provided under Section 5 (c) of Republic Act No. 7638;

(g) To make public from time to time such portions of the information obtained by him hereunder as are in the public interest; and to make annual and special reports to Congress and to submit therewith recommendations for additional legislation; and to provide for the publication of his reports and decisions in such form and manner as may be best adapted for public information and use: Provided, That the Secretary shall have any authority to make public any trade secret or any commercial or financial information which is obtained from any person or entity which is privileged or confidential, except that the Secretary may disclose such information to officers and employees of appropriate law enforcement agencies or to any officer or employee of any such law enforcement agency upon the prior certification by an officer of any such law enforcement agency that such information will be maintained in confidence and will be used only for official law enforcement purposes; and

(h) Whenever a final order has been entered against any defendant in any suit brought by the government to prevent and restrain any violation of the anti-trust provisions of this Act to make investigation, upon his initiative, of the manner in which the decree has been or is being carried out, and upon the application of the Secretary of Justice, it shall be his duty to make such investigation. He shall transmit to the Secretary of Justice a report embodying his findings and recommendations as a result of any such investigation, and the report shall be made public at the discretion of the Secretary.

• See IRR Supplement for Section 15 here

CHAPTER V Transition Phase

Section 16. Phases of Deregulation. – In order to provide a smooth implementation of deregulation, the policy shift shall be done in two (2) phases: Phase I (Transition Phase) and Phase II (Full Deregulation Phase).

Section 17. Buffer Fund. – The President may, when the interest of the consumers so requires, taking into account the rise in the domestic prices of petroleum products, use the "Reserve Control Account" as a buffer fund in an amount not exceeding Two billion nine hundred million pesos (P 2,900,000,000.00) to cover increases in the prices of petroleum products, except premium gasoline, during the Transition Phase over the prices prevailing as of the date of the effectivity of this Act. The "Reserve Control Account" refers to a lump sum collation of reserve impositions deducted from the appropriations approved by Congress for the operation of the government and the implementation of projects and programs.

Section 18. Automatic Oil Pricing Mechanism. – To enable the domestic price of petroleum products to approximate and promptly reflect the prices of oil in the international market, an automatic pricing mechanism shall be established. To this end, the following laws are hereby amended:

(a) Paragraph (a), Section 8 of Republic Act No. 6173, as amended by Section 3 of Executive Order No. 172, to read as follows:

"SEC. 8. Powers of the Board Upon Notice and Hearing. – The Board shall have the power:

"(a) To set the wholesale posted price of petroleum products during the Transition Phase.

"For this purpose and for the protection of the public interest, the Board shall, after due notice and hearing, at which any consumer of petroleum products and other parties who may be affected may appear and be heard, and within one (1) month after the effectivity of this Act, approve a market-oriented formula to determine the WPP of petroleum products based solely on the changes of either the Singapore Posting of refined petroleum products, the SIP or the crude landed cost.

"Thereafter, the Board shall at the proper times automatically adjust the WPP of petroleum products based on the approved formula, through appropriate orders, without the need for notice and hearing.

"The Board shall, on the dates of effectivity of the automatic oil pricing formula, the initial WPP or the adjusted WPP, publish the same, together with the corresponding computation in two (2) national newspapers of general circulation."

(b) Paragraph 1 of Letter of Instruction No. 1441, to read as follows:

"1. To review and reset the prices of domestic petroleum products up or down as necessary on or before the third Monday of each month to reflect the new WPP of refined petroleum products based on the approved automatic pricing formula."

(c) Paragraph 2 of Letter of Instruction No. 1441 is hereby deleted. In lieu thereof a new paragraph is inserted to read as follows:

"2. The price adjustment shall be reflected automatically in the approved WPP of each petroleum product."

(d) The provisions of Section 3 (a) and (c) and Section 5 of Executive Order No. 172 to the contrary notwithstanding, the Board shall, during the Transition Phase, maintain the current margin of dealers and rates charged by water transport operators, haulers and pipeline concessionaires. Depending on the basis of the APM, the Board shall, within one (1) month after the effectivity of this Act and after proper notice and full public hearing, prescribe a formula which will automatically set the margins of marketers and dealers, and the rates charged by water transport operators, haulers and pipeline concessionaires: Provided, That such formula shall take effect simultaneously with the effectivity of the automatic oil pricing formula. Thereafter, the Board shall set the said margins and rates based on the approved formula without the necessity for public notice and hearing.

The Board shall, on the day of the effectivity of the aforesaid formula, publish in at least two (2) newspapers of general circulation the mechanics of the formula for the information of the public.

CHAPTER VI Full Deregulation Phase

Section 19. Start of Full Deregulation. – Full deregulation of the Industry shall start five (5) months following the effectivity of this Act: Provided, however, That when the public interest so requires, the President may accelerate the start of full deregulation upon the recommendation of the DOE and the Department of Finance when the prices of crude oil and petroleum products in the world market are declining and the value of the peso in relation to the US dollar is stable, taking into account the relevant trends and prospects: Provided, further, That the foregoing provisions notwithstanding, the five (5)-month Transition Phase shall continue to apply to LPG, regular gasoline, and kerosene as socially-sensitive petroleum products and said petroleum products shall be covered by the automatic pricing mechanism during the said period.

Upon the implementation of full deregulation as provided herein, the Transition Phase is deemed terminated and the following laws are repealed:

(a) Republic Act No. 6173, as amended;

(b) Section 5 of Executive Order No. 172, as amended;

(c) Letter of Instruction No. 1431, dated October 15, 1984;

(d) Letter of Instruction No. 1441, dated November 15, 1984;

(e) Letter of Instruction No. 1460, dated May 9, 1985;

(f) Presidential Decree No. 1889; and

(g) Presidential Decree No. 1956, as amended by Executive Order No. 137:

Provided, however, That in case full deregulation is started by the President in exercise of the authority provided in this Section, the foregoing laws shall continue to be in force and effect with respect to LPG, regular gasoline and kerosene for the rest of the five (5)-month period.

Section 20. Jurisdiction on Pricing of Piped Gas. – Section 3 of Executive Order No. 172, is hereby amended to read as follows:

"SEC. 3. Jurisdiction, Powers and Functions of the Board. – The Board shall, upon proper notice and hearing, fix and regulate the rate of schedule or prices of piped gas to be charged by duly franchised gas companies which distribute gas by means of underground pipe system."

CHAPTER VII Final Provisions

Section 21. OPSF Balance. – All outstanding claims against OPSF as of the effectivity of this Act, subject to the existing auditing rules and regulations of the Commission on Audit (COA), shall be considered as accounts payable of the National Government. For this purpose, and any law to the contrary notwithstanding, the reimbursement certificates issued by the DOE covering the said outstanding claims shall be honored and accepted by the Bureau of Customs and the Bureau of Internal Revenue as payment to the extent of ten percent (10%) per payment of the tariff duties and specific taxes from the creditor-claimants against the OPSF until such claims are settled in full: Provided, That the reimbursement certificates shall not be transferable.

Section 22. Initial Public Offering. – In compliance with the constitutional mandate to encourage private enterprises to broaden their base of ownership and in recognition of the vital role of oil in the national economy, any person or entity engaged in the oil refinery business shall make a public offering through the stock exchange of at least ten percent (10%) of its common stock within a period of three (3) years from the effectivity of this Act or the commencement of its refinery operations: Provided, That no single person or entity shall be allowed to own more than five percent (5%) of the stock offering: Provided, further, That any crude oil refining company and any stockholder thereof shall not acquire, directly or indirectly, any share of stock offered by any other crude oil refining company pursuant to his Section: Provided, finally, That any such company which made the requisite public offering before the effectivity of this Act shall be exempted from the requirement.

• See IRR Supplement for Section 22 here

Section 23. Implementing Rules and Regulations. – The DOE, in coordination with the Board, the DENR, DFA, Department of Labor and Employment (DOLE), Department of Health (DOH), DOF, DTI, National Economic and Development Authority (NEDA) and TLRC, shall formulate and issue the necessary implementing rules and regulations within sixty (60) days after the effectivity of this Act.

Section 24. Penal Sanction. – Any person who violates any of the provisions of this Act shall suffer the penalty of three (3) months to one (1) year imprisonment and a fine ranging from Fifty thousand pesos (P 50,000.00) to Three hundred thousand pesos (P 300,000.00).

Section 25. Public Information Campaign. – The DOE, in coordination with the Board and the Philippine Information Agency (PIA), shall undertake an information campaign to educate the public on the deregulation program of the Industry.

Section 26. Budgetary Appropriations. – Such amount as may be necessary to effectively implement this Act shall be taken by the DOE form its annual appropriations, the DOE' Special Fund created under Section 8 of Presidential Decree No. 910, as amended, and such amount allocated under Section 10 of this Act.

Section 27. Separability Clause. – If, for any reason, any section or provision of this Act is declared unconstitutional or invalid, such parts not affected thereby shall remain in full force and effect.

Section 28. Repealing Clause. – All laws, Presidential decrees, executive orders, issuances, rules and regulations or parts thereof, which are inconsistent with the provisions of this Act are hereby repealed or immediately modified accordingly.

Section 29. Effectivity. – This Act shall take effect upon its complete publication in at least two (2) national newspapers of general circulation.

Approved: February 10, 1998

October 26, 1990

AN ACT TO CONTROL TOXIC SUBSTANCES AND HAZARDOUS AND NUCLEAR WASTES, PROVIDING PENALTIES FOR VIOLATIONS THEREOF, AND FOR OTHER PURPOSES

• See IRR here

SECTION 1. Short Title. — This Act shall be known as the "Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990."

SECTION 2. Declaration of Policy. — It is the policy of the State to regulate, restrict or prohibit the importation, manufacture, processing, sale, distribution, use and disposal of chemical substances and mixtures that present unreasonable risk and/or injury to health or the environment; to prohibit the entry, even in transit, of hazardous and nuclear wastes and their disposal into the Philippine territorial limits for whatever purpose; and to provide advancement and facilitate research and studies on toxic chemicals.

SECTION 3. Scope. — This Act shall cover the importation, manufacture, processing, handling, storage, transportation, sale, distribution, use and disposal of all unregulated chemical substances and mixtures in the Philippines, including the entry, even in transit, as well as the keeping or storage and disposal of hazardous and nuclear wastes into the country for whatever purpose.

SECTION 4. Objectives. — The objectives of this Act are:

a) To keep an inventory of chemicals that are presently being imported, manufactured, or used, indicating, among others, their existing and possible uses, test data, names of firms manufacturing or using them, and such other information as may be considered relevant to the protection of health and the environment;

b) To monitor and regulate the importation, manufacture, processing, handling, storage, transportation, sale, distribution, use and disposal of chemical substances and mixtures that present unreasonable risk or injury to health or to the environment in accordance with national policies and international commitments;

c) To inform and educate the populace regarding the hazards and risks attendant to the manufacture, handling, storage, transportation, processing, distribution, use and disposal of toxic chemicals and other substances and mixtures; and

d) To prevent the entry, even in transit, as well as the keeping or storage and disposal of hazardous and nuclear wastes into the country for whatever purpose.

SECTION 5. Definition. — As used in this Act:

a) Chemical substance means any organic or inorganic substance of a particular molecular identity, including:

i) Any combination of such substances occurring in whole or in part as a result of chemical reaction or occurring in nature; and

ii) Any element or uncombined chemical.

b) Chemical mixture means any combination of two or more chemical substances if the combination does not occur in nature and is not, in whole or in part, the result of a chemical reaction, if none of the chemical substances comprising the combination is a new chemical substance and if the combination could have been manufactured for commercial purposes without a chemical reaction at the time the chemical substances comprising the combination were combined. This shall include nonbiodegradable mixtures.

c) Process means the preparation of a chemical substance or mixture after its manufacture for commercial distribution:

i) In the same form or physical state or in a different form or physical state from that which it was received by the person so preparing such substance or mixture; or

ii) As part of an article containing a chemical substance or mixture.

d) Importation means the entry of a product or substance into the Philippines (through the seaports or airports of entry) after having been properly cleared through or still remaining under customs control, the product or substance of which is intended for direct consumption, merchandising, warehousing, or for further processing.

e) Manufacture means the mechanical or chemical transformation of substances into new products whether work is performed by power-driven machines or by hand, whether it is done in a factory or in the worker's home, and whether the products are sold at wholesale or retail.

f) Unreasonable risk means expected frequency of undesirable effects or adverse responses arising from a given exposure to a substance.

g) Hazardous substances are substances which present either:

i) Short-term acute hazards, such as acute toxicity by ingestion, inhalation or skin absorption, corrosivity or other skin or eye contact hazards or the risk of fire or explosion; or

ii) Long-term environmental hazards, including chronic toxicity upon repeated exposure, carcinogenicity (which may in some cases result from acute exposure but with a long latent period), resistance to detoxification process such as biodegradation, the potential to pollute underground or surface waters, or aesthetically objectionable properties such as offensive odors.

h) Hazardous wastes are hereby defined as substances that are without any safe commercial, industrial, agricultural or economic usage and are shipped, transported or brought from the country of origin for dumping or disposal into or in transit through any part of the territory of the Philippines.

Hazardous wastes shall also refer to by-products, side-products, process residues, spent reaction media, contaminated plant or equipment or other substances from manufacturing operations, and as consumer discards of manufactured products.

i) Nuclear wastes are hazardous wastes made radioactive by exposure to the radiation incidental to the production or utilization of nuclear fuels but does not include nuclear fuel, or radioisotopes which have reached the final stage of fabrication so as to be usable for any scientific, medical, agricultural, commercial, or industrial purpose.

SECTION 6. Functions, Powers and Responsibilities of the Department of Environment and Natural Resources. — The Department of Environment and Natural Resources shall be the implementing agency tasked with the following functions, powers, and responsibilities:

a) To keep an updated inventory of chemicals that are presently being manufactured or used, indicating, among others, their existing and possible uses, quantity, test data, names of firms manufacturing or using them, and such other information as the Secretary may consider relevant to the protection of health and the environment;

b) To require chemical substances and mixtures that present unreasonable risk or injury to health or to the environment to be tested before they are manufactured or imported for the first time;

c) To require chemical substances and mixtures which are presently being manufactured or processed to be tested if there is a reason to believe that they pose unreasonable risk or injury to health or the environment;

d) To evaluate the characteristics of chemicals that have been tested to determine their toxicity and the extent of their effects on health and the environment;

e) To enter into contracts and make grants for research, development, and monitoring of chemical substances and mixtures;

f) To conduct inspection of any establishment in which chemicals are manufactured, processed, stored or held before or after their commercial distribution and to make recommendations to the proper authorities concerned;

g) To confiscate or impound chemicals found not falling within the standard set by the rules and regulations and the said acts cannot be enjoined except after the chemicals have been impounded;

h) To monitor and prevent the entry, even in transit, of hazardous and nuclear wastes and their disposal into the country;

i) To subpoena witnesses and documents and to require other information if necessary to carry out the provisions of this Act;

j) To call on any department, bureau, office, agency, state university or college, and other instrumentalities of the Government for assistance in the form of personnel, facilities, and other resources as the need arises in the discharge of its functions;

k) To disseminate information and conduct educational awareness campaigns on the effects of chemical substances, mixtures and wastes on health and environment; and

l) To exercise such powers and perform such other functions as may be necessary to carry out its duties and responsibilities under this Act.

SECTION 7. Inter-Agency Technical Advisory Council. — There is hereby created an Inter-Agency Technical Advisory Council attached to the Department of Environment and Natural Resources which shall be composed of the following officials or their duly authorized representatives:

Secretary of Environment and Natural Resources — Chairman

Members:

Secretary of Health

Director of the Philippine Nuclear Research Institute

Secretary of Trade and Industry

Secretary of Science and Technology

Secretary of National Defense

Secretary of Foreign Affairs

Secretary of Labor and Employment

Secretary of Finance

Secretary of Agriculture

Representative from a non-governmental organization on health and safety

The representative from the non-governmental organization shall be appointed by the President for a term of three (3) years.

The Council shall have the following functions:

a) To assist the Department of Environment and Natural Resources in the formulation of the pertinent rules and regulations for the effective implementation of this Act;

b) To assist the Department of Environment and Natural Resources in the preparation and updating of the inventory of chemical substances and mixtures that fall within the coverage of this Act;

c) To conduct preliminary evaluation of the characteristics of chemical substances and mixtures to determine their toxicity and effects on health and the environment and make the necessary recommendations to the Department of Environment and Natural Resources; and

d) To perform such other functions as the Secretary of Environment and Natural Resources may, from time to time, require.

SECTION 8. Pre-Manufacture and Pre-Importation Requirements. — Before any new chemical substance or mixture can be manufactured, processed or imported for the first time as determined by the Department of Environment and Natural Resources, the manufacturer, processor or importer shall submit the following information: the name of the chemical substance or mixture; its chemical identity and molecular structure; proposed categories of use; an estimate of the amount to be manufactured, processed or imported; processing and disposal thereof; and any test data related to health and environmental effects which the manufacturer, processor or importer has.

SECTION 9. Chemicals Subject to Testing. — Testing shall be required in all cases where:

a) There is a reason to believe that the chemical substances or mixture may present an unreasonable risk to health or the environment or there may be substantial human or environmental exposure thereto;

b) There are insufficient data and experience for determining or predicting the health and environmental effects of the chemical substance or mixture; and

c) The testing of the chemical substance or mixture is necessary to develop such data.

The manufacturers, processors or importers shall shoulder the costs of testing the chemical substance or mixture that will be manufactured, processed, or imported.

SECTION 10. Action by the Secretary of Environment and Natural Resources of his Duly Authorized Representative. — The Secretary of Environment and Natural Resources or his duly authorized representative shall, within ninety (90) days from the date of filing of the notice of manufacture, processing or importation of a chemical substance or mixture, decide whether or not to regulate or prohibit its importation, manufacture, processing, sale, distribution, use or disposal. The Secretary may, for justifiable reasons, extend the ninety-day pre-manufacture period within a reasonable time.

SECTION 11. Chemical Substances Exempt from Pre-Manufacture Notification. — The manufacture of the following chemical substances or mixtures shall be exempt from pre-manufacture notification:

a) Those included in the categories of chemical substances and mixtures already listed in the inventory of existing chemicals;

b) Those to be produced in small quantities solely for experimental or research and developmental purposes;

c) Chemical substances and mixtures that will not present an unreasonable risk to health and the environment; and

d) Chemical substances and mixtures that exist temporarily and which have no human or environmental exposure such as those which exist as a result of chemical reaction in the manufacture or processing of a mixture of another chemical substance.

SECTION 12. Public Access to Records, Reports or Notification. — The public shall have access to records, reports, or information concerning chemical substances and mixtures including safety data submitted, data on emission or discharge into the environment, and such documents shall be available for inspection or reproduction during normal business hours except that the Department of Environment and Natural Resources may consider a record, report or information or particular portions thereof confidential and may not be made public when such would divulge trade secrets, production or sales figures or methods, production or processes unique to such manufacturer, processor or distributor, or would otherwise tend to affect adversely the competitive position of such manufacturer, processor or distributor. The Department of Environment and Natural Resources, however, may release information subject to claim of confidentiality to a medical research or scientific institution where the information is needed for the purpose of medical diagnosis or treatment of a person exposed to the chemical substance or mixture.

SECTION 13. Prohibited Acts. — The following acts and omissions shall be considered unlawful:

a) Knowingly use a chemical substance or mixture which is imported, manufactured, processed or distributed in violation of this Act or implementing rules and regulations or orders;

b) Failure or refusal to submit reports, notices or other information, access to records as required by this Act, or permit inspection of establishment where chemicals are manufactured, processed, stored or otherwise held;

c) Failure or refusal to comply with the pre-manufacture and pre-importation requirements; and

d) Cause, aid or facilitate, directly or indirectly, in the storage, importation, or bringing into Philippine territory, including its maritime economic zones, even in transit, either by means of land, air or sea transportation or otherwise keeping in storage any amount of hazardous and nuclear wastes in any part of the Philippines.

SECTION 14. Criminal Offenses and Penalties. —

a) (i) The penalty of imprisonment of six (6) months and one (1) day to six (6) years and one (1) day and a fine ranging from Six hundred pesos (P600.00) to Four thousand pesos (P4,000.00) shall be imposed upon any person who shall violate Section 13(a) to (c) of this Act and shall not be covered by the Probation Law. If the offender is a foreigner, he or she shall be deported and barred from any subsequent entry into the Philippines after serving his or her sentence;

(ii) In case any violation of this Act is committed by a partnership, corporation, association or any juridical person, the partner, president, director or manager who shall consent to or shall knowingly tolerate such violation shall be directly liable and responsible for the act of the employees and shall be criminally liable as a co-principal;

(iii) In case the offender is a government official or employee, he or she shall, in addition to the above penalties, be deemed automatically dismissed from office and permanently disqualified from holding any elective or appointive position.

b) (i) The penalty of imprisonment of twelve (12) years and one (1) day to twenty (20) years, shall be imposed upon any person who shall violate Section 13(d) of this Act. If the offender is a foreigner, he or she shall be deported and barred from any subsequent entry into the Philippines after serving his or her sentence;

(ii) In the case of corporations or other associations, the above penalty shall be imposed upon the managing partner, president or chief executive in addition to an exemplary damage of at least Five hundred thousand pesos (P500,000.00). If it is a foreign firm, the director and all the officers of such foreign firm shall be barred from entry into the Philippines, in addition to the cancellation of its license to do business in the Philippines;

(iii) In case the offender is a government official or employee, he or she shall in addition to the above penalties be deemed automatically dismissed from office and permanently disqualified from holding any elective or appointive position.

c) Every penalty imposed for the unlawful importation, entry, transport, manufacture, processing, sale or distribution of chemical substances or mixtures into or within the Philippines shall carry with it the confiscation and forfeiture in favor of the Government of the proceeds of the unlawful act and instruments, tools or other improvements including vehicles, sea vessels, and aircrafts used in or with which the offense was committed. Chemical substances so confiscated and forfeited by the Government at its option shall be turned over to the Department of Environment and Natural Resources for safekeeping and proper disposal.

d) The person or firm responsible or connected with the bringing or importation into the country of hazardous or nuclear wastes shall be under obligation to transport or send back said prohibited wastes;

Any and all means of transportation, including all facilities and appurtenances that may have been used in transporting to or in the storage in the Philippines of any significant amount of hazardous or nuclear wastes shall at the option of the government be forfeited in its favor.

SECTION 15. Administrative Fines. — In all cases of violations of this Act, including violations of implementing rules and regulations which have been duly promulgated and published in accordance with Section 16 of this Act, the Secretary of Environment and Natural Resources is hereby authorized to impose a fine of not less than Ten thousand pesos (P10,000.00), but not more than Fifty thousand pesos (P50,000.00) upon any person or entity found guilty thereof. The administrative fines imposed and collected by the Department of Environment and Natural Resources shall accrue to a special fund to be administered by the Department exclusively for projects and research activities relative to toxic substances and mixtures.

SECTION 16. Promulgation of Rules and Regulations. — The Department of Environment and Natural Resources, in coordination with the member agencies of the Inter-Agency Technical Advisory Council, shall prepare and publish the rules and regulations implementing this Act within six (6) months from the date of its effectivity.

SECTION 17. Appropriations. — Such amount as may be necessary to implement the provisions of this Act is hereby annually appropriated and included in the budget of the Department of Environment and Natural Resources.

SECTION 18. Separability Clause. — If any provision of this Act is declared void or unconstitutional, the remaining provisions thereof not affected thereby shall remain in full force and effect.

SECTION 19. Repealing Clause. — All laws, presidential decrees, executive orders and issuances, and rules and regulations which are inconsistent with this Act are hereby repealed or modified accordingly.

SECTION 20. Effectivity Clause. — This Act shall take effect after fifteen (15) days following its publication in the Official Gazette or in any newspaper of general circulation.

Approved: October 26, 1990

Published in the Philippine Times Journal on November 9, 1990. Published in the Official Gazette, Vol. 86 No. 53 page 10057 on December 31, 1990.

July 28, 1976

PROMULGATING AN ACT TO PROMOTE AN ACCELERATED EXPLORATION,

DEVELOPMENT, EXPLOITATION, PRODUCTION AND UTILIZATION OF COAL

• See IRR here

WHEREAS, the increasing cost of imported crude oil imposes an unduly heavy demand on the country's international reserves thereby making it imperative for the government to pursue actively the exploration, development and exploitation of indigenous energy resources;

WHEREAS, while coal has been identified as a fossil fuel known to exist in mineable quantities in the country which could provide a viable energy source for some vital industries, large tracts of coalbearing lands have not been explored and mined in a manner and to an extent adequate to meet the needs of the economy;

WHEREAS, the proliferation of fragmented coal permits and leases has prevented, or deterred, the adequate and speedy exploration, development, exploitation and production of indigenous coal resources;

WHEREAS, to develop, achieve and implement a well- planned, systematic and meaningful exploration, development, exploitation and production of local coal resources, participation of the private sector with sufficient capital, technical and managerial resources must be encouraged and the technical and financial capabilities of the coal industry upgraded;

WHEREAS, hand in hand with an accelerated coal exploration, development, exploitation and production program, it is essential that the market for domestic coal production be developed by granting incentives to prospective coal users to convert their facilities for coal utilization;

WHEREAS, to realize the above, it is necessary to amend and/or supplement existing legislation relating to coal;

WHEREAS, Article XVII, Section 12 of the Constitution of the Philippines provides in part that when the National interest so requires the incumbent President of the Philippines or the interim Prime Minister may review all contracts, concessions, permits or other forms or privileges for the exploration, development, exploitation or utilization of natural resources entered into, granted, issued or acquired before the ratification of the Constitution;

NOW, THEREFORE, I, FERDINAND E. MARCOS, by virtue of the powers vested in me by the Constitution of the Philippines, do hereby decree and declare as part of the law of the land the following:

Section 1. Short Title. This Act shall be known and may be cited as "The Coal Development Act of 1976."

Section 2. Declaration of Policy. It is hereby declared to be the policy of the state to immediately accelerate the exploration, development, exploitation production and utilization of the country's coal resources. A coal development program is therefore promulgated and established by this Decree.

Section 3. Coal Development Program. The country shall be divided into coal regions and exploration and exploitation programs shall be instituted and implemented pursuant to this Decree.

These programs shall be geared towards the promotion and development of the necessary technical and financial capability to undertake a work program to effectively explore exploit coal resources.

In recognition, however, of the social constraints that may be encountered in effecting the establishment of coal units in regions where there is high concentration of small coal miners, a special coal program shall be formulated and implemented in coordination with the appropriate government agency/agencies to meet the particular needs of such regions.

Section 4. Government to Undertake Coal Exploration Development and Production. The Government, through the Energy Development Board, its successors or assigns, shall undertake by itself the active exploration, development and production of coal resources. It may also execute coal operating contracts as hereafter defined. The active exploration and exploitation of coal resources by the Government or through coal operating contracts may cover public lands, any unreserved or unappropriated coal bearing lands, claims located and recorded by private parties areas covered by valid and subsisting coal revocable permits, coal leases and other existing rights granted by the Government for the exploration and exploitation of coal lands, government mineral reservations, coal areas/mines whose leases or permits are presently owned or operated or held by government-owned or controlled corporations and coal mineable areas operated or held by government agencies.

Section 5. Blocking System. The Energy Development Board shall establish coal regions delimiting its extent and boundaries after taking into consideration the various coal bearing lands of the Philippines. Each coal region shall be divided into meridional blocks or quadrangles of two minutes (2') of latitude and one and one-half minutes (1-1/2) of longtitude, each block containing an area of one thousand (1,000) hectares, more or less, the boundaries thereof to coincide with the full two minutes and one and one-half minutes of latitude and longtitude, respectively, based on the Philippine Coast and Geodetic Survey Map, scale of 1:50,000.

Section 6. Coal Contract Area. In conformity with the blocking system herein established, the Energy Development Board shall determine in each coal region what areas, are available for coal operating contracts. In opening such contract areas, the Energy Development Board may resort to either of the following alternative procedures:

(a) By offering an area or areas for bids, specifying the minimum requirements and conditions in accordance with this Decree: or

(b) By negotiating with a qualified party for a coal operating contract under the terms and conditions provided in this Decree.

No person shall be entitled to more than fifteen (15) blocks of coal lands in any one coal region.

Section 7. Existing Permitees/Leaseholders. All valid and subsisting holders of coal revocable permits, coal leases and other existing rights granted by the government for the exploration and exploitation of coal lands or the operators thereof duly approved by the appropriate government agency, shall be given preference in the grant of coal operating contract over the area covered by their permits, leases or other rights subjects to their compliance with the following conditions and guidelines:

(a) Those whose areas fall within a block as described in Section 5 hereof shall organize or consolidate themselves into a coal unit, singly or jointly with valid and subsisting holders of coal revocable permits, coal leases and other existing coal rights or the duly approved operator thereof, of contiguous blocks provided that a coal unit shall not be entitled to more than fifteen (15) blocks of coal lands in any coal region.

(b) Consolidation of areas into coal unit which shall require approval by the Energy Development Board must be completed within a period of six (6) months from the effectivity of this Decree.

(c) In order to qualify for consolidation into coal units, permitees, leaseholders or operators must have complied with the requirements of their existing permits, leases and/or rights as defined under existing laws, rules and regulations.

(d) Members of the coal unit shall agree on the form, terms and extent of participation of its individual members. All holders of valid and subsisting coal revocable permits, coal leases and other existing rights granted by the government for the exploration, development and exploitation of coal lands shall be given percentage interest in the unit or payments out of production under such terms and conditions as may be agreed by the members of the unit and approved by the Energy Development Board.

(e) In order to give holders of valid and subsisting coal revocable permits, coal leases and other existing rights granted by the government for the exploration and exploitation of coal lands or the operators thereof duly approved by the appropriate government agency, sufficient time to upgrade their financial and technical capabilities to develop a viable work program to be embodied in a coal operating contract, the deadline for entering and concluding a duly executed coal operating contract is extended from July 27, 1977 to January 27, 1978; Provided, that the extension shall apply only to those who have complied with the requirements of unitization; Provided, further that those who have unitized may be granted by the Board during the extension period special operating permits in order not to disrupt existing coal operations; Provided, finally, that no further extension shall be allowed after the extension granted in this decree, and coal permits, leases and other rights not converted to coal operating contract for any cause by January 27, 1978 shall be deemed automatically canceled and the area thereby shall be open for coal operating contract in accordance with Section 6 thereof.

Section 8. Coal Operating Contract. Each coal operating contract herein authorized shall, subject to the approval of the President, be executed by the Energy Development Board.

In a coal operating contract, service, technology and financing are furnished by the operator for which it shall be entitled to the stipulated fee and reimbursement of operating expenses. Accordingly, the operator must be technically competent and financially capable as determined by the Energy Development Board to undertake the coal operations as required in the contract.

Section 9. Obligations of Operator in Coal Operating Contract. The operator under a coal operating contract shall undertake, manage and execute the coal operations which shall include:

(a) The examination and investigation of lands supposed to contain coal, by detailed surface geologic mapping, core drilling, trenching, test pitting and other appropriate means, for the purpose of probing the presence of coal deposits and the extent thereof;

(b) Steps necessary to reach the coal deposits so that can be mined, including but not limited to shaft sinking and tunneling; and

(c) The extraction and utilization of coal deposits.

The Government shall oversee the management of operation contemplated in the coal operating contract and in this connection, shall require the operator to:

(a) Provide all the necessary service and technology;

(b) Provide the requisite financing;

(c) Perform the work obligations and program prescribed in the coal operating contract which shall be less than those prescribed in this Decree;

(d) Operate the area on behalf of the Government in accordance with good coal mining practices using modern methods appropriate for the geological conditions of the area to enable maximum economic production of coal, avoiding hazards to life, health and property, avoiding pollution of air, land and waters, and pursuant to an efficient and economic program of operation;

(e) Furnish the Energy Development Board promptly with all information, data and reports which it may require;

(f) Maintain detailed technical records and account of its expenditures;

(g) Maintain detailed technical records and account of safety demarcation of agreement acreage and work areas, non-interference with the rights of the other petroleum, mineral and natural resources operators;

(h) Maintain all necessary equipment in good order and allow access to these as well as to the exploration, development and production sites and operations to inspectors authorized by the Energy Development Board;

(i) Allow representatives authorized by the Energy Development Board full access to their accounts, books and records for tax and other fiscal purposes;

On the other hand, the Energy Development Board shall:

(a) On behalf of the Government, reimburse the operator for all operating expenses not exceeding ninety percent (90%) of the gross proceeds from production in any year; Provided, that if in any year, the operating expenses exceed ninety percent (90%) of the gross proceeds from production, then the unrecovered expenses shall be recovered from the operation of succeeding years. Operating expenses mean the total expenditures for coal operation incurred by the operator as provided in a coal operating contract;

(b) Pay the operator a fee, the net amount of which shall not exceed forty per cent (40%) of the balance of the gross income after deducting all operating expenses;

(c) Reimburse operating expenses and pay the operator's fee in such form and manner as provided for in the coal operating contract.

Section 10. Additional Fee. All valid and subsisting holders of coal revocable permits, coal leases and other existing rights granted by the government for the exploration and exploitation of coal lands or the duly qualified operators thereof who have organized their area into a coal unit, subject to conditions imposed by the Energy Development Board, be granted in the coal operating contract, in addition to the operator's fee provided in Section 9, a special allowance, the amount of which shall not exceed forty percent (40%) of the balance of the gross income after deducting all operating expenses.

Coal operating contracts entered into with Philippine citizens or corporations except those already covered under the proceeding paragraph, shall be granted a special allowance the amount of which shall not exceed thirty per cent (30%) of the balance of the gross income after deducting all operating expenses; Provided, that coal operating contracts in which Philippine citizens or corporations have a minimum participating interest of forty percent (40%) in the contract area may, subject to reasonable conditions imposed by the Energy Development Board, be granted a special allowance not exceeding twenty percent (20%) of the balance of the gross income after deducting all operating expenses.

"For the purpose of this section, a Philippine corporation means a corporation organized under Philippine laws at least sixty percent (60%) of the capital of which, including the voting shares, is owned and held by citizens of the Philippines.

Section 11. Minimum Terms and Conditions. In addition to those elsewhere provided in this Decree, every coal operating contract executed in pursuance hereof shall contain the following minimum terms and conditions:

(a) Every operator shall be obliged to spend in direct prosecution of exploration work not less than the amounts provided for in the coal operating contract and these amounts shall not be less than the total obtained by multiplying the number of coal blocks covered by the contract by One Million Pesos (P1,000,000.00) per block annually; Provided, that if the area or a portion thereof is suitable for open pit mining as determined jointly by the operator and the Energy Development Board, the minimum expenditure requirement herein provided may be reduced up to Two Hundred Thousand Pesos (P200,000.00) per block annually. From the time coal reserves in commercial quantity have been determined jointly by the operator and the Energy Development Board, the operator shall undertake the development and production of the contract area within the period agreed upon in the contract and shall be obliged to spend in the development and production of the contract area an amount which shall be determined by negotiation between the operator and the Energy Development Board taking into account factors such as measured reserves, quality of coal, mining method and location and accessibility to market; Provided, further, that with the approval of the Board, the operator may concentrate all the annual work obligations on any one or more of several contiguous or geologically related blocks if it is shown that such concentration of work will be most advantageous and beneficial in the development and operation of the coal operating contract are; Provided, further, that if during any contract year, the operator shall spend more than the amount of money required to be spent, the excess may be credited against the money required to be spent by the operator during the succeeding years; Provided, furthermore, that should the operator fail to comply with the work obligations provided for in the coal operating contract, it shall pay to the Government the amount it should have spent but did not in direct prosecution of its work obligations; Provided, finally, that except in case of open pit mining, the operator shall drill at least thirty (30) holes per block and a minimum footage of exploratory holes before the end of the exploration period as may be specified in the coal operating contract. The Board may, however, taking into account the geological and technical factors involved; allow a lesser number of drill holes and footage giving due credit to other accepted exploration methods and practices.

(b) The exploration period under every coal operating contract shall be for two (2) years. If the operator has complied with its exploration work obligations, the exploration period may be extended for another two (2) years. The coal operating contract shall lapse unless coal of commercial quantity is measured during the exploration period or at the end thereof in any area covered by the coal operating contract. If coal of commercial quantity is measured, the coal operating contract shall remain in force for development and production during the balance of the exploration period and/or for an additional period ranging from ten (10) to twenty (20) years, thereafter renewable for a series of three (3)-year periods not exceeding twelve (12) years under such terms and conditions as may be agreed upon by the parties.

(c) All materials, equipment, plants and other installations erected or placed on the exploration and/or production area of a movable nature by the operator shall become properties of the Energy Development Board if not removed therefrom within one (1) year after the termination of the coal operating contract.

(d) The operator shall be subject to the provisions of laws of general application relating to labor, health, safety and ecology insofar as they are not in conflict with the provisions otherwise contained in this Decree.

Section 12. Full Disclosure of Interest in Coal Operating Contract. Interest held in the coal operating contract by domestic mining companies and/or the latter's stockholders may be allowed to any extent after full disclosure thereof and approved by the Energy Development Board.

Section 13. Arbitration. The Energy Development Board may stipulate in a coal operating contract executed under this Decree that disputes in the implementation thereof between the Government and the operator may be settled by arbitration.

Section 14. Performance Guarantee. In order to guarantee compliance with the obligations of the operator executed under this Decree, the operator shall post a bond or other guarantee of sufficient amount in favor of the Government and with surety or sureties satisfactory to the Energy Development Board, conditioned upon the faithful performance by the operator of any or all of the obligations under and pursuant to said coal operating contracts.

Section 15. Transfer and Assignment. The rights and obligations under a coal operating contract executed under this Decree shall not be transferred or assigned without the prior approval of the Energy Development Board; Provided, that such transfer or assignment may be made only to a qualified person possessing the resources and capability to continue the mining operation of the coal operating contract and that the operator has complied with all the obligations of the coal operating contract.

Section 16. Incentives to Operators. The provisions of any law to the contrary notwithstanding, a contract executed under this Decree may provide that the operator shall have the following incentives:

(a) Exemption from all taxes except income tax;

(b) Exemption from payment of tariff duties and compensating tax on importation of machinery and equipment and spare parts and materials required for the coal operations subject to the following conditions:

1. that machinery, equipment, spare parts and materials of comparable price and quality are not manufactured in the Philippines;

2. that the same are directly and actually needed and will be used exclusively by the operator in its operations or in operation for it by a contractor;

3. That they are covered by shipping documents in the name of the operator to whom the shipment will be delivered directly by the customs authorities; and

4. that prior approval of the Energy Development Board was obtained by the operator before the importation of such machinery, equipment, spare parts and materials, which approval shall not be unreasonably withheld; Provided, however, that the operator or its contractor may not sell, transfer, or dispose of the machinery, equipment, spare parts and materials without the prior approval of the Energy Development Board and payment of taxes and duties thereon; Provided, further, that should the operator or its contractor sell, transfer, or dispose of these machinery, equipment, spare parts or materials without the prior approval of the Energy Development Board, it shall pay twice the amount of the taxes and duties thereon; Provided, finally, that the Energy Development Board shall allow and approved the sale, transfer or disposition of the said items without tax if made:

(a) to another operator under a coal operating contract;

(b) for reasons of technical obsolescence; or

(c) for purposes of replacement to improve and/or expand the operation under the coal operating contract.

(c) Accelerated Depreciation. At the option of the taxpayer and in accordance with the procedures established by the Bureau of Internal Revenue, fixed assets owned by the coal units in the performance of its coal operating contract may be:

1. Depreciated to the extent of not more than twice as fast as normal rate of depreciated or depreciated at normal rate of depreciation if expected life is ten (10) years or less; or

2. Depreciated over any number of years between five (5) years and expected life if the latter is more than ten (10) years, and the depreciation thereon allowed as a deduction from taxable income; Provided, that the taxpayer notifies the Bureau of Internal Revenue at the beginning of the depreciation period which depreciation rate allowed by this section will be used by it.

(d) Foreign Loans and Contracts. The right to remit at the prevailing exchange rate at the time of remittance of such sum as may be necessary to cover principal and interest of foreign loans and foreign obligations arising from technological assistance contracts relating to the performance of the coal operating contract, subject to Central Bank regulations.

(e) Preference in Grant of Government Loans. Government financial institutions such as the Development Bank of the Philippines, the Philippine National Bank, the Government Service Insurance System, the Social Security System, the Land bank of the Philippines and other government institutions as are now engaged or may hereafter engage in financing on investment operations shall, in accordance with and to the extent allowed by the enabling provisions of their respective charters or applicable laws, accord high priority to applications for financial assistance submitted by operators in the performance of coal operating contracts, whether such financial assistance be in the form of equity participation in preferred, common or preferred convertible shares of stock, or in loans and guarantee, and shall facilitate the processing thereof and the release of the funds therefor. However, financial assistance under this paragraph shall be extended only to operators which are Philippine Nationals as the term is defined under Republic Act No. 5186, as amended.

(f) Entry upon the sole approval of the Energy Development Board which shall not be unreasonably withheld of alien technical and specialized personnel (including the immediate members of their families) who may exercise their profession only for the operation of the operator as prescribed in its coal operating contract with the government under this Decree; Provided, that if the employment or connection of any such alien with the operator ceases, the applicable laws and regulations on immigration shall apply to him and his immediate family; Provided, further, that Filipinos shall be given preference to positions for which they have adequate training, and; Provided, finally, that the operator shall adopt and implement a training program for Filipinos along technical or specialized lines, which program shall be reported to the Energy Development Board.

Sec. 16-A. Entry and Use of Private Lands

a. Coal exploration, development and exploitation is hereby declared of public use and benefit and for which the power of eminent domain may be invoked and exercised for the entry, acquisition and use of private lands; Provided, that any person or entity acquiring any option or right on such land after the execution of a coal operating contract covering such land not be entitled to the compensation herein provided.

b. The coal operator shall not be prevented from entry into private lands for the purpose of exploring, developing and exploiting coal contract area, upon prior written notification sent to, and duly received by, the surface owner of the land and occupant thereof. However, if the surface owner of the land and occupant thereof refuses to allow the coal operator's entry into the land despite his receipt of the written notification, or refuses to receive said written notification, or cannot be found, then the coal operator shall notify the Energy Development Board of such fact, and shall be attached thereto a copy of the written notification.

c. In all cases mentioned in the preceding paragraph, the coal operator shall post a bond with the Energy Development Board in the amount to be fixed by said Energy Development Board based on type of the land and the value of the trees, plants and other existing improvements thereon which shall be the basis of compensation of the surface owner of the land and/or occupant thereof in the appropriated cases mentioned in the next succeeding paragraph.

d. In the absence of an agreement between the coal operator and the surface owner of the land and/or occupant, the surface owner of the land and occupant thereof shall be entitled to the following compensation;

• Titled Lands. For the conduct of exploration, development and exploitation within lands covered by Torrens Title or other government-recognized titles, the surface owner shall receive as compensation from the coal operator at least One Peso (P1.00) for every ton of coal extracted on his hand. However, in the event that the surface owner suffers damage to his plants, trees, crops and other improvements on his land as a direct result of the coal operation conducted by the coal operator, the former shall be entitled to compensation for the value thereof that are damaged or destroyed.

• Untitled Lands or land with Incomplete Titles. For the conduct of exploration, development and exploitation of coal within untitled lands or lands with incomplete titles, the surface owner shall receive as compensation from the coal operator at least Fifty Centavos (P0.50) for every ton of coal extracted on his land. However, in the event that the surface landowner suffers damage to his plants, trees, crops and other improvements on his land as a direct result of operation conducted by the coal operator, the former shall be entitled to compensation for the value thereof that are damaged or destroyed.

Lands with incomplete titles referred to herein shall mean those possessory rights which can ripen into rights of ownership registerable under the Torrens System.

• Government Reserved Lands. Government reserved lands for purposes other than mining shall be open to a coal operating contract by filing an application therefore with the Energy Development Board, subject always to compliance with pertinent laws, rules and regulations covering such reserved lands; Provided, that the compensation due the surface owner shall accrue equally between the supervising agency and of the Energy

Sec. 16-B Timber Rights. Any provision of law to the contrary notwithstanding, the operator may cut trees or timber within his coal contract area subject to applicable law and to the rules and regulations of the Bureau of Forest Development as may be necessary for the exploration, development and exploitation of his coal contract area; Provided, that if the lands covered in the coal contract area are already covered by existing timber concessions, the amount of timber needed and manner of cutting and removal thereof shall be subject to the same rules and agreed upon by the operator and the timber concessionaire; Provided, further, that, in case no agreement can be reached between the operator and the timber concessionaire, the matter shall be submitted to the Energy Development Board whose decision shall be final. The operator granted a timber right shall be obligated to perform reforestation works within the coal contract area in accordance with the regulations of the Bureau of Forest Development."

Sec. 16-C Water Rights. A coal operator shall also enjoy water rights necessary for the exploration, development and exploitation of his coal contract area upon application filed with the Director of the Bureau of Public Works in accordance with the existing laws of water and the rules and regulations promulgated thereunder; Provided, that water rights already granted or legally existing shall not thereby be impaired; Provided, further, that the government reserves the right to regulate water rights and the reasonable and equitable distribution of water supply so as to prevent the monopoly of the use thereof."

Sec. 16-D Applicability of Certain Provisions of Presidential Decree No. 463 The provisions of Chapter XIV (Penal Provisions) of Presidential Decree No. 463, otherwise known as the "Mineral Resources Development Decree of 1974" shall be applicable to the coal operations; Provided, that any reference therein to the Decree and to the Bureau Director of Mines shall mean Presidential Decree No. 972 and the Energy Development Board, respectively.

Section 17. Incentives to Coal Users. The following incentives shall be granted to enterprises/industries which will convert their existing oil fired plants facilities to make the same adaptable for coal burning:

(a) Tax Exemption on Imported Capital Equipment. Within seven (7) years from the date of approval of the plan for conversion of existing oil fired plants and facilities to make the same adaptable for coal burning, the importation of machinery and equipment, and spare parts shipped with such machinery and equipment necessary to implement their program of conversion shall not be subject to tariff and customs duties and compensating tax; Provided, that said machinery, equipment and spare parts are:

1. Not manufactured in the Philippines in reasonable quantity and quality at reasonable prices;

2. Directly and actually needed and will be used exclusively in the implementation of the conversion of existing plants to coal burning;

3. Covered by shipping documents in the name of the enterprise to whom the shipment will be delivered direct by customs authorities;

4. Prior approval, before importation of such machinery, equipment and spare parts was obtained. If imported machinery, equipment and spare parts are sold, transferred or otherwise disposed of without the required prior approval, the importer shall pay twice the amount of the tax and duty thereon. However, the sale, transfer or disposition of the said items shall be allowed and approved without tax and duty if made to another company for use in:

(a) Converting its existing plants to coal burning subject to the same conditions and limitations as herein provided;

(b) For reasons of technical obsolescence; or

(c) For replacement of equipment to improve and/or expand the operations of the enterprise.

For replacement of modernization of existing facilities of subject enterprises/industries which will be utilized partly or entirely in the conversion of coal burning, in lieu of an exemption from payment of tariff duties and taxes, it shall be granted deferment in the payment of such taxes and duties for a period of not exceeding ten (10) years after posting the appropriate bond as may be required by the Secretary of Finance.

(b) Tax Credit on Domestic Capital Equipment. Within seven (7) years from the date of approval of the plan for conversion of existing oil fired plants, and facilities to make the same adaptable for coal burning, a tax credit equivalent to one hundred per cent (100%) of the value of the compensating tax and customs duties that would have been paid on machinery, equipment and spare parts necessary to implement the program of conversion had these items been imported, shall be given to the industry with a program of conversion to coal burning that purchases said machinery, equipment and spare parts from a domestic manufacturer; Provided:

1. That said machinery, equipment and spare parts are directly and actually needed and will be used exclusively in the implementation of the conversion of its existing plants to coal burning;

2. That the prior approval was obtained for the purchase of the machinery, equipment and spare parts. If the machinery, equipment and spare parts are sold, transferred or otherwise disposed of without the required prior government approval, the purchaser shall pay twice the amount of the tax credit given to it. However, the sale, transfer or disposition of the said items shall be allowed and approved without tax if made:

a) To another company for use in its approved program of conversion to coal burning subject to the same conditions and limitations as herein provided:

b) For reasons of technical obsolescence; or

c) For purposes of replacement to improve and/or expand the operation of the enterprise.

(c) Net operating Lose Carryover. A net operating loss incurred in any of the first ten (10) years after the start of the implementation of the coal conversion program may be carried over as a deduction from taxable income for the six (6) years immediately following the year of such loss. The entire amount of the loss shall be carried over to the first of the (6) taxable years following the loss, and any portion of such loss which exceeds the taxable income of such first year shall be deducted in like manner from the taxable income of the next remaining five (5) years. The net operating loss shall be computed in accordance with the provision of the National Internal Revenue Code, any provision of this Decree to the contrary notwithstanding, except that income not taxable either in whole or in part under this or other laws shall be included in the gross income.

(d) Capital Gains Tax Exemption. Exemption from income tax on the proceeds of the gains realized from the sale, disposition or transfer of capital assets which are sold or disposed of as a result of the conversion of facilities to a coal burning plant; Provided, that such sale, disposition or transfer are registered with the Bureau of Internal Revenue; Provided, however, that the gains realized from the subject sale, disposition or transfer of capital assets are invested in new issues of capital stock of an enterprise registered under the Investment Incentives Act, as amended, and other allied incentives laws; Provided, further, that the shares of stock representing the investment are not disposed of, transferred, assigned, or conveyed for a period of seven (7) years from the date the investment was made; and, Provided, finally, that if such shares of stock are disposed of within the said period of seven (7) years, all taxes due on the gains realized from the original transfer, sale, or disposition of the capital assets shall become immediately due and payable.

(e) Accelerated Depreciation. At the option of the taxpayer and in accordance with the procedure established by the Bureau of Internal Revenue, fixed assets used by the industry in carrying out the program of conversion to coal burning may be:

1. Depreciated to the extent of not more than twice as fast as normal rate of depreciation or depreciated at normal rate of depreciation if expected life is ten (10) years or less; or

2. Depreciated over any number of years between five (5) years and expected life if the latter is more than ten (10) years, and the depreciation thereon allowed as a deduction from taxable income; Provided, that the taxpayer notifies the Bureau of Internal Revenue at the beginning of the depreciation period which depreciation rate allowed by this section will be used by it.

(f) Foreign Loans and Contracts. The right to remit at the prevailing exchange rate at the time of remittance such sum as may be necessary to cover interest and principal of foreign loan and foreign obligations arising from technological assistance contracts relating to the implementation of the program of conversion to coal burning subject to Central Bank regulation.

(g) Preference in Grant of Government Loans. Government financial institutions such as the Development Bank of the Philippines, the Philippine National Bank, the Government Service Insurance System, the Social Security System, the Land Bank of the Philippines and such other government institutions as are now engaged or may hereafter engage in financing of investment operations shall, in accordance with and to the extent allowed by the enabling provisions of their respective charters or applicable laws, accord high priority to application for financial assistance submitted by enterprises/industries requiring funding to implement the program of conversion to coal burning, whether such financial assistance be in the form of equity participation in preferred, common or preferred convertible shares of stock, or in loans and guarantee, and shall facilitate the processing thereof and the release of the funds therefor; However, financial assistance shall be extended only under this paragraph to industry converting to coal burning which is a Philippine National as this term is defined under Republic Act No. 5186, as amended.

The foregoing incentives to enterprises/industries which will convert their existing oil fired plants and facilities to make the same adaptable for coal burning shall be administered and implemented by the Board of Investments created under Republic Act No. 5186, also known as the Investment Incentives Act, as amended. The Board of Investments shall have the power to process and approved, under such terms and conditions as it may deem necessary, plans for conversion to coal burning and applications for availment of the foregoing incentives. It shall promulgate such rules and regulations as may be necessary to implement the intent and provisions of this section.

Section 18. Implementing Agency. Except as otherwise provided in Section 17 hereof, the Energy Development Board, created pursuant to Presidential Decree No. 910, in addition to the powers, duties and functions under existing laws, shall be charged with carrying out the provisions of this Decree and shall be vested with the authority to promulgate rules and regulations implementing thereof.

Section 19. Separability Clause. Should any provision of this Decree be held unconstitutional, no other provision hereof shall be effected thereby.

Section 20. Repealing Clause. The provisions of Presidential Decree No. 463, otherwise known as the "Mineral Resources Development Decree of 1974" and other laws insofar as they deal, relate or affect the exploration, exploitation and administration of coal lands are hereby repealed. Furthermore, all laws, decree, executive orders, administrative orders, rules, and regulations, or parts thereof in conflict or inconsistent with any provision of this Decree are hereby repealed, revoked, modified or amended accordingly.

Section 21. Effectivity. This Decree shall take effect immediately upon approval.

Done in the City of Manila, this 28th day of July, in the year of Our Lord, nineteen hundred and seventy-six.

June 18, 1949

AN ACT TO PROMOTE THE EXPLORATION, DEVELOPMENT, EXPLOITATION, AND UTILIZATION OF THE PETROLEUM RESOURCES OF THE PHILIPPINES; TO ENCOURAGE THE CONSERVATION OF SUCH PETROLEUM RESOURCES; TO AUTHORIZE THE SECRETARY OF AGRICULTURE AND NATURAL RESOURCES TO CREATE AN ADMINISTRATION UNIT AND A TECHNICAL BOARD IN THE BUREAU OF MINES; TO APPROPRIATE FUNDS THEREFOR; AND FOR OTHER PURPOSES

CHAPTER I General Provisions

ARTICLE 1. Short Title of Act. — The short title of this Act shall be "Petroleum Act of 1949. "

ARTICLE 2. Definition of terms. — When used in this Act, the following terms shall, unless the context otherwise indicates, have the following respective meanings:

(a) "Petroleum" shall include any mineral oil, hydrocarbon gas, bitumen, asphalt, mineral wax, and all other similar or naturally associated substances; with the exception of coal, peat, bituminous shale, and/or other stratified mineral fuel deposits.

(b)"Crude oil" means oil in its natural state before the same has been refined or otherwise treated, but excluding water and foreign substances.

(c) "Natural gas" means gas obtained from boreholes and wells and consisting primarily of hydrocarbon.

(d) "Government" means the Government of the Philippines.

(e)"State" means the Republic of the Philippines.

(f)"Permittee," "concessionaire" or "contractor" means a person to whom a permit, concession, or contract, as the case may be, has been granted or awarded under the provisions of this Act, his successors and assigns.

(g)"Person" includes a natural person, corporation, or partnership.

(h)A "barrel" is equivalent to 158. 98 liters or 42 U. S. gallons.

(i)All measurements of distances, width, length, areas, depth and volume, and weight shall be in the system designated by the Secretary of Agriculture and Natural Resources. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

(j)Words in singular shall include the plural, and vice versa.

ARTICLE 3. State ownership. — All natural deposits or occurrences of petroleum or natural gas in public and/or private lands in the Philippines, whether found in, on or under the surface of dry lands, creeks, rivers, lakes, or other submerged lands within the territorial waters or on the continental shelf, or its analogue in an archipelago, seaward from the shores of the Philippines which are not within the territories of other countries, belong to the State, inalienably and imprescriptibly.

ARTICLE 4. Title to land. — The ownership or the right to the use of lands for agricultural, industrial, commercial, residential, mining, or for any purpose other than for petroleum exploration, development or exploitation does not include the ownership of, nor the right to explore for, exploit, or utilize the petroleum or natural gas deposits in, on or under the surface of such land.

ARTICLE 5. Granting of petroleum rights. — The right to explore for, develop, exploit or utilize the petroleum resources described in article three hereof may only be granted to duly qualified persons by means of concessions in accordance with the provisions of this Act. The Government, however, reserves the right to undertake such work either by itself or through its instrumentalities, or through competent persons qualified to undertake such work as independent contractor or contractors under a contract of service executed for the Republic of the Philippines by the President and approved by the Congress of the Philippines in accordance with the provisions of article thirteen of this Act.

Exploration or exploitation rights may be exclusive within certain areas; but no exclusive rights may be granted for refining or transportation.

ARTICLE 6. Granting of concession is discretionary with the Government. — The granting of concession under this Act is discretionary with the Government, except in the cases mentioned in article eleven hereof, where, upon the fulfillment of the formalities and requirements of this Act, the granting thereof is obligatory upon the Government.

ARTICLE 7. Petroleum operation a public utility. — Everything relating to the exploration for and exploitation of petroleum which may exist naturally or below the surface of the earth, and everything relating to the manufacture, refining, storage, or transportation by special methods of petroleum as provided for in this Act, is hereby declared to be of public utility.

ARTICLE 8. Concessionaire assumes risks. — Concessions referred to in this Act shall be granted at the complete risk of the interested party. The Government does not guarantee the existence of petroleum or undertake, in any case, title warranty.

ARTICLE 9. Ownership not conferred. — Exploration and Exploitation Concessions do not confer upon the concessionaire the ownership over the petroleum lands and petroleum deposits, but only the right to explore for, develop, exploit, and utilize them for the period and under the conditions determined by this Act.

CHAPTER II Concessions

ARTICLE 10. Kinds of concessions. — Concessions may be any of the following kinds and have the following respective objects:

a. Non-Exclusive Exploration Permit, which grants to the permittee the non-exclusive right to conduct geological or geophysical exploration on specified areas.

b. Exploration Concession, which grants to the concessionaire the exclusive right to explore for petroleum within specified areas.

c. Exploitation Concession, which grants to the concessionaire the exclusive right to develop petroleum production within the specified areas.

d. Refining Concession, which grants to the concessionaire the right to manufacture or refine petroleum, or to extract its derivatives.

e. Pipe Line Concession, which grants to the concessionaire the right to provide and operate pipe line systems for transporting petroleum.

ARTICLE 11. Obligatory concessions. — Subject to the fulfillment of the formalities and requirements provided for in this Act, the granting of the following concessions shall be obligatory upon the Government:

a. Exploitation Concession, to the holder of an Exploration Concession, for such parcels as he may select for exploitation and to the holders of Petroleum Drilling Leases issued under the Petroleum Act Numbered Twenty-nine hundred and thirty-two, or of petroleum mining claims located and held under the Act of Congress of July first, nineteen hundred and two, which are existing and in force at the time of the enactment of this Act, when said holders shall apply to have the same governed by the provisions of this Act, and be given the privileges granted thereby;

b. Refining Concession and/or Pipe Line Concession, to the holder of an Exploitation Concession, when the manufacturing or transportation is directly related, although not necessarily restricted, to the Exploitation Concession; and

c. Refining Concession, to the holder of a Pipe Line Concession, or Pipe Line Concession to the holder of a Refining Concession, when the two concessions are directly, although not restrictively, related.

The foregoing, however, shall not apply in the case of any concessionaire who is in arrears in any payments due the Government arising out of or in connection with any petroleum concession, lease, or mining claim, until such arrears have been paid, or, if in dispute, until a cash or surety bond has been posted, sufficient to cover all arrears in dispute.

The rights and obligations conferred by concessions which are obligatory under this article are to be regarded as following from the initial concessions which, under the provisions of this Act, include the right to receive such subsequent concessions.

ARTICLE 12. Designation of petroleum regions. — For purposes of this Act, the Secretary of Agriculture and Natural Resources, after due study of the different prospective petroleum lands of the Philippines, may divide them into a number of prospective petroleum regions, delimiting their extent and boundaries, and issuing the order and notice establishing such regions.

ARTICLE 13. Petroleum reservation. — Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President of the Philippines may set apart petroleum reservations, and shall, by proclamation, declare the establishment of such reservations and the boundaries thereof.

The Government may explore, develop, and exploit such petroleum reservation either by itself or through its instrumentalities, or through competent persons under a contract of service, in accordance with article five of this Act. Proposals by qualified persons to carry out such work for the Government as independent contractor or contractors shall be filed with the Director of Mines who shall forward the same with his findings and recommendations to the Secretary of Agriculture and Natural Resources who, in turn, shall submit the same with his recommendations to the President of the Philippines. The President is hereby authorized to take such necessary action as he may deem proper on such proposals and for this purpose, may execute the necessary contract or contracts for and in behalf of the Government. In the event such contract is executed, the same shall be submitted to the Congress of the Philippines for its approval.

No petroleum reservation may be established over any areas covered by application for Exploration or Exploitation Concession already filed or granted. If at any time after the establishment of a petroleum reservation, the Secretary of Agriculture and Natural Resources, after due investigation, should find it to the best interest of the Government, that any area within the reservation should be opened to Exploration or Exploitation Concession under the provisions of this Act, such area or areas may be recommended to be released from the reservation and declared open to Exploration or Exploitation Concession under this Act by an executive proclamation of the President concurred in by a joint resolution of the Congress of the Philippines.

ARTICLE 14. Free areas. — All lands within the territorial limits of the Philippines including those submerged beneath seas, bays, lakes, rivers, lagoons, or the territorial waters, or on the continental shelf, or its analogue in an archipelago, but which are not within the National Reserve Areas, or Petroleum Reservations, or covered by valid and existing Exploration or Exploitation Concession, or Petroleum Drilling Leases acquired under the Petroleum Act (Act No. 2932), or of petroleum mining claims located and held under the Act of Congress of July first, nineteen hundred and two, as amended, are called Free Areas and as such are open to application for Exploration Concession by any duly qualified person. Application for said areas shall be filed with the Director of Mines in accordance with the provisions of article twenty-eight of this Act.

ARTICLE 15. National Reserve Areas. — Areas which have been included in any Exploration or Exploitation Concession but which have been subsequently given up by the concessionaire voluntarily or in accordance with the requirement of articles fifty and fifty-three of this Act; or areas covered by Exploration or Exploitation Concession which have expired or have been cancelled; or areas which have been included within any of the two kinds of concession but which are found to be in excess the maximum areas allowed by this Act for such concessions, are called National Reserve Areas, and as such may be applied either for Exploration or Exploitation Concession by duly qualified persons only after the Secretary of Agriculture and Natural Resources shall have first announced by means of notices published in the Official Gazette and in one daily English newspaper of general circulation published in the City of Manila, at least once a month for three consecutive months, that said lands duly described are ready for disposition and that application therefor may be filed within a certain date fixed in the notice. Application for such areas shall be filed with the Director of Mines in accordance with article twenty-eight of this Act, and the concession may be granted by the Secretary of Agriculture and Natural Resources in favor of the applicant whose offer shall be found best to serve the interest of the Government.

ARTICLE 16. Lands covered by concessions are subject to public easements. — All lands covered by concessions granted under this Act shall be subject to public easement established or recognized by existing or future laws: Provided, That the rights of the petroleum concessionaire to search, prospect, and drill for, produce, extract, transport, store, process, and treat petroleum on, under, and from said lands, and other rights granted to him under this Act are recognized: And provided, further, That in case public easement shall be established after the effective date of the concession contract the concessionaire shall be paid just compensation for actual damages that he may suffer as a consequence thereof. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 17. Operations of concessionaire subject to existing mining rights. — The operations of the concessionaire under the provisions of this Act shall be subject to existing mining rights, grants, permits, leases, and concessions in respect of substances other than petroleum and to existing petroleum rights, grants, leases, or concessions.

ARTICLE 18. Right of Government to establish reservations or grant rights. — Concessions granted under this Act are subject to the right of the Government to establish reservations other than petroleum reservations, to grant mining rights, permits, leases, and concessions in respect of substances other than petroleum, and to grant rights other than mining rights in, on, or under any of the lands covered by the concession granted under this Act, provided that the rights of the petroleum concessionaire to search, prospect, and drill for, produce, extract, transport, store, process, and treat petroleum on, under, and from, said lands, and the other rights granted to him under this Act are not impaired or unreasonably interfered with.

ARTICLE 19. Additional benefits to the Government in certain cases. — In the disposition of the National Reserve Areas and in case of conflicts of applications for concessions, the Secretary of Agriculture and Natural Resources may require additional benefits to the Government over and above the minimum requirements provided for in this Act. These additional benefits may include, but shall not be restricted to, bonuses or cash payments made singly or on installments over a period of time; or increased royalty on the quantity of oil produced; or undertakings in addition to those required by law for the promotion of education, public health, social welfare and amelioration, and other public services; or increased work obligations on the concession.

ARTICLE 20. Right to enter private land. — Exploration and exploitation concessionaires are granted the right to enter upon private lands covered by their concessions for the purpose of conducting geological or geophysical studies, with the right to use all instruments and apparatus necessary to carry out such studies, subject to the obligations to indemnify the owner or legal occupant of the land for all material damage suffered by the property, its annexes or appurtenances as a result of such studies, provided that in no case shall the occupancy of private buildings, yards or gardens be authorized against the will of their owner.

In the event that the right granted in this article shall be denied by the owner of the private land or by its legal occupant, the concessionaire may apply for and, upon posting such bond as may be fixed and approved by the Court of First Instance of the province where the land is situated, the court shall issue an order allowing such right pending the final determination of the proper amount that shall be paid by the concessionaire to the landowner or legal occupant.

ARTICLE 21. Easements over private land. — When easements of temporary occupancy over private lands are needed by a concessionaire for the purpose of carrying out any work essential to his operations under the provisions of this Act, he may enter into the necessary agreement with the owner or legal occupant of such private lands. If no agreement could be reached, or if the owner or legal occupant refuses to grant such easement, or in general, when any obstacle of whatever nature exists to the immediate and certain acquisition of the necessary surface area, or of any right indispensable to the concessionaire for the purpose of the concession, the Court of First Instance of the province where the land is situated shall, upon application of the concessionaire and posting of the necessary bond, grant to the said concessionaire authority to use and occupy the land needed by him in his operations, pending final determination of the case which shall include among others the reasonable value or rental of the land to be occupied and the compensation for any resulting damage that the landowner or legal occupant may suffer as a result of such occupation.

When the occupation of a private land is needed by the concessionaire in connection with his concession, for the purpose of constructing, maintaining, operating, and drilling oil wells, tanks, reservoirs, waterways, pipe lines, roads, railroads, tramlines, telephone and telegraph lines,rfields, radio stations, powerhouses, transmission lines, pumping stations, wharves, piers, and terminals, which are hereby declared to be for public use or benefit, the right of eminent domain may be exercised by the Government through the concessionaire, in accordance with the applicable laws on the matter.

In all cases of voluntary agreement between the concessionaire and a private landowner, as referred to in this article, a copy thereof shall be furnished to the Secretary of Agriculture and Natural Resources.

For the purpose of this article the necessity of the work will be presumed in the cases of well drilling and auxiliary works, construction of pipe lines, tanks, pumping plants, power systems, warehouses, shops, and means of transport and communication.

ARTICLE 22. Easement over public land. — When easement or right of temporal occupancy over public land is needed by a concessionaire for the purpose of carrying out any work essential to his operation under this Act, such right may be granted by the Secretary of Agriculture and Natural Resources with due regard to prior rights of third parties and subject to applicable laws and regulations. The easement or temporary occupancy over public highways, roads and bridges by a concessionaire for the purpose of carrying out any work essential to his operations under this Act may be granted, upon such terms as may be deemed proper in the public interest, by the Secretary of Public Works and Communications who shall see to it that such easement or temporary occupancy shall cause the least inconvenience to the general public.

The presumption of necessity stated in article twenty-one applies likewise in this case. (Amending Article 22 of R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 4889, [June 17, 1967])

ARTICLE 23. Use of water, timber and clay. — Concessionaires under this Act shall have the gratuitous right to utilize for exploration work within his concession, timber, water, and clay from any public lands within such concession, all subject to existing prior rights thereto, to the regulations issued under this Act and to other laws and regulations on the matter. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 24. General obligations. — Work corresponding to concession granted under this Act shall be commenced with reasonable promptness and prosecuted with reasonable diligence in accordance with good oil field practice; provided, that in the case of Exploration or Exploitation Concession, the performances of the corresponding work, in compliance with the provisions of this article, successively in various areas included in the concession, in accordance with an efficient and economic program determined by the concessionaire and submitted to the Secretary of Agriculture and Natural Resources will be construed as reasonable diligence in regard to the total area included in such concession; conforming with accepted good practices in connection with modern and scientific methods of exploration, drilling, equipping and operating wells to enable maximum economic production of petroleum; avoiding hazards to life, health and property; avoiding the pollution of ther, and of public or private land or waters.

Non-compliance with the provisions of this article may be the cause of the imposition of penalties under the provisions of this or other laws; or of court action to compel compliance therewith; and continued non-compliance shall constitute cause for cancellation of the concession.

ARTICLE 25. Submission of information and reports by the concessionaires. — Concessionaires shall submit to the Secretary of Agriculture and Natural Resources all information that the latter may require from time to time, particularly but not limited to, reports on the results of geological and geophysical examinations including a complete history of each well formation record; electric logs, and result of all tests; production reports showing all pertinent production data, etc. , in the form and manner and at intervals prescribed by the regulations.

ARTICLE 26. Employment of Filipinos. — Concessionaires under this Act are obligated to give preference to Philippine citizens in all types of employment within the country, insofar as such citizens are qualified to perform the corresponding work with reasonable efficiency and without hazard to the safety of the operations; and are obligated likewise to maintain effective programs of training and advancement commensurate with the demonstrated abilities of such citizens to perform satisfactorily the various types of operations involved in working the concession. The concessionaires, however, shall not be hindered from using employees of their own selection and without restriction for executive or technical work and for all other work which, in their judgment, and with the approval of the Director of Mines, requires highly specialized training or long experience.

Each concessionaire shall submit to the Government annual report giving statistical and descriptive information relevant to the provisions of this article, as provided in the Regulations, and shall be obligated to demonstrate to the satisfaction of the Secretary of Agriculture and Natural Resources, upon request, that these provisions are being complied with. In the event that, in the opinion of the Secretary of Agriculture and Natural Resources, such provisions are not complied with, he is empowered to require the concessionaire to take such steps as may be necessary to effect such compliance; without prejudice, however, to the right of the concessionaire under the exception provided in the last sentence of the first paragraph of this article.

ARTICLE 27. Force Majeure. — Failure on the part of the concessionaire to fulfill any of the terms and conditions provided by this Act or its regulations or by other relevant laws shall not be deemed a breach of such obligation on the part of the concessionaire insofar as such failure results from force majeure, including the act of God, war, insurrection, riot, civil commotion, strike, tide, storm, flood, lightning, explosion, fire, earthquake, and any other happening which the concessionaire could not reasonably prevent control or avoid: Provided, That if during the term of any concession obtained under this Act, including any extension thereof, the concessionaire is prevented from fully exercising its rights granted under this Act during any extended period of force majeure resulting from act of God, war, insurrection, riot, or civil commotion which the concessionaire could not reasonably prevent or control or avoid, such periods shall be excluded in computing the period of time chargeable to the term of the concession or any extension thereof, when, within six months from the time such period of force majeure is considered to have ended, the concessionaire has formally applied to the Secretary of Agriculture and Natural Resources for recognition that such period of force majeure did exist and that the concessionaire is entitled to the consideration herein provided.

The extension shall be granted under the same terms and conditions as those contained in the original concession, subject, however, to the provisions of Articles forty-seven and forty-nine of this Act.

No further renewal shall be allowed to any exploration concessionaire at the end of the second extension. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 28. Application for concession. — Application for concession under this Act shall be filed with the Director of Mines who shall examine and pass upon the same as well as upon the qualifications of the applicant. If he finds the application in order and the applicant duly qualified, he shall forward the said application, together with his findings and recommendations thereon, to the Secretary of Agriculture and Natural Resources who may, unless otherwise provided for in this Act, publish a notice thereof at least once a week for three consecutive weeks in the Official Gazette and in any newspaper of general circulation, published in English in the City of Manila.

At any time during the period of publication of the said notice, an adverse claim stating the nature and grounds thereof, may be filed with the Director of Mines. If no adverse claim is filed within the said period of publication, it shall be conclusively presumed that no such adverse claim exists and thereafter no objection from third parties to the granting of the concession shall be heard; and the contract of concession shall be executed by the Secretary of Agriculture and Natural Resources for the Republic of the Philippines, and the concessionaire, in accordance with existing laws and regulations for the conveyance of leasehold rights, which contract of concession shall state definitely the principal rights and obligations of the parties concerned.

ARTICLE 29. Disposition of adverse claims. — Adverse claims based upon applications filed at any time after the first date of publication of the notice mentioned in article twenty-eight shall not be considered. Adverse claims based upon conflict of applications shall be disposed of in accordance with the provisions of article thirty hereof. Adverse claims based upon other grounds shall be decided by the Secretary of Agriculture and Natural Resources.

ARTICLE 30. Disposition of applications in conflict. — In case an adverse claim is filed in accordance with article twenty-eight of this Act, covering areas in conflict and the adverse claimant is found to be duly qualified to apply for concession under this Act, the Director of Mines shall inform the applicant and the adverse claimant of the existence of such conflict and of any additional benefits to the Government which the Secretary of Agriculture and Natural Resources may require in accordance with the provisions of article nineteen of this Act, whereupon each of them shall, within sixty days from the date of the receipt of such information, submit to the Director of Mines an amended application stating therein such additional benefits to the Government as he may desire to offer for the area in conflict. The Secretary of Agriculture and Natural Resources may accept such application which, in his opinion, will best serve the national interest. The right of any aggrieved party to appeal to the courts as in ordinary cases is hereby recognized.

ARTICLE 31. Qualifications of applicants. — Applicants for concessions under this Act shall have the following qualifications:

In case of an individual, he shall be a citizen of the Philippines, be of legal age, and have the capacity to contract obligations.

In case of an association of individuals, it shall be either a partnership or a corporation duly organized and constituted under the laws of the Philippines, at least sixty per centum of the capital of which is and shall at all times be owned and held by citizens of the Philippines.

During the effectivity and subject to the provisions of the ordinance appended to the Constitution of the Philippines, citizens of the United States and all forms of business enterprises owned and controlled, directly or indirectly, by citizens of the United States shall enjoy the same rights and obligations under the provisions of this Act in the same manner as to, and under the same conditions imposed upon, citizens of the Philippines or corporations or associations owned or controlled by citizens of the Philippines.

Any applicant shall present satisfactory evidence showing that sufficient finance, organization, resources, technical competence, and skills necessary to conduct the operations to be undertaken under the concession being applied for, in a manner which is in accordance with the best method known to the industry, are available to such applicant.

ARTICLE 32. Officials and employees of the Government disqualified. — Officials and employees of the executive branch of the Government connected with the administration and disposition of mineral resources including petroleum, shall not be allowed, directly or indirectly during their incumbency and for five years thereafter, to apply or acquire concessions, or to be interested, in anywise, in any application filed, or concession acquired, under this Act.

CHAPTER III Non-Exclusive Exploration Permit

ARTICLE 33. Who may apply. — Any person legally qualified to acquire concession under the provisions of this Act may, upon application, acquire a permit for a non-exclusive right to undertake surface geological or geophysical investigations within Free Areas as defined in article fourteen of this Act, subject to the provisions of article thirty-five and thirty-six of this Act and the Regulations.

ARTICLE 34. Application for Non-Exclusive Exploration Permit. — Application for Non-Exclusive Exploration Permit shall be filed with the Director of Mines who shall examine and pass upon the application and qualifications of the applicant. He shall forward the same with his findings and recommendation to the Secretary of Agriculture and Natural Resources for his final action. The applicant shall pay an application fee of one hundred pesos in the manner prescribed by the Regulations. In the event that no concession is granted corresponding to such application, the sum paid shall be returned to the applicant less such amount as corresponds to the expenses incurred by the Government in connection with the consideration of the application, as determined by the Regulations.

ARTICLE 35. Entry upon private property. — Right to enter upon or to occupy private property in connection with the Non-Exclusive Exploration Permit must be secured from the owner or legal occupant thereof.

ARTICLE 36. Right conveyed under Non-Exclusive Exploration Permit. — Non-Exclusive Exploration Permit issued under this Act conveys no right for the permittee to make any exploratory drilling, nor carry any priority or preferential right to the area it covers so as to entitle the permittee to exclusive Exploration or Exploitation Concession, but is intended only to permit geological and/or geophysical exploration, preparatory to making application for exclusive Exploration Concession.

The permittee shall inform the Secretary of Agriculture and Natural Resources prior to undertaking any exploratory work as to the general nature of the work proposed to be done, the size of the parties to be put in the field, and the areas to be covered by such work. He shall submit at the end of every six months a report on the result of the geological and/or geophysical surveys conducted by him.

ARTICLE 37. Term of Non-Exclusive Exploration Permit. — The Non-Exclusive Exploration Permit shall be for a term of not exceeding two years, renewable for another two years, at the discretion of the Secretary of Agriculture and Natural Resources.

CHAPTER IV Exploration Concession

ARTICLE 38. Definition of exploration. — The term "Exploration" means all work that have for their object the discovery of petroleum, including, but not restricted to, surveying and mapping, aerial photography, surface geology, geophysical investigations, testing of subsurface conditions by means of borings or structural drillings, and all such auxiliary work as are useful in connection with such operations.

Test wells drilled for exploratory purposes may be of such size and type suitable for oil production, but the actual production of petroleum is not included in the term "Exploration," except that petroleum found during exploration may be freely used by the concessionaire in his operations for exploration purposes only with the same concession: Provided, That petroleum may be produced and marketed if necessary in the exercise of sound petroleum engineering practices or produced and marketed from wells drilled for the purpose of delineating a discovered petroleum deposit and only after notice to the Secretary of Agriculture and Natural Resources. When petroleum is produced and marketed under such circumstances, the concessionaire shall pay royalty to the Government in the same manner and form as provided in this Act: Provided, however, That the right to produce and market petroleum as authorized herein may be terminated by the Secretary of Agriculture and Natural Resources after a hearing and order to that effect. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 39. Application for Exploration Concession. — Application for Exploration Concession shall be filed with the Director of Mines in accordance with the provisions of article twenty-eight of this Act. The Regulations shall prescribe the form and contents of application for Exploration Concession.

ARTICLE 40. Map and technical descriptions. — A map of the block desired to be explored shall accompany the application for Exploration Concession. This map shall be prepared in accordance with the Regulations, and shall show the location of the block with regard to the municipalities and province or provinces in which it is located, the four corners of the block in case it is rectangular, or the natural boundaries thereof in case the block adjoins rivers, creeks, lakes, or shore lines, or the extension or projections thereof into these bodies of water in case the block is, in whole or in part, on submerged lands.

The location of the block shall be plotted on Coast and Geodetic Survey or Army base map, and shall show, among others, the topographic features of the area. The map shall be submitted together with the technical description of the corner markings and the metes and bounds or distances and bearings of the sides of the block. The technical description and map shall also indicate the bearings and distances of the tie line from some known reference location monument to one corner, preferably Number 1, of the block, in such a way that the block desired can be plotted from such tie line and descriptions on the Progress or Index Map of the Bureau of Mines, where all areas applied for shall be plotted to show the relative positions of such areas.

The boundaries of the block desired shall be well-established on the ground by placing permanent and conspicuous monuments, posts or mounds of earth on the corners, so that at any time, the block can be identified, and later be tied to accurate surveys. The bearings and distances of the block applied for exploration shall be sufficiently accurate so that the approximate area of the block can be computed from the given bearings and distances on the sides.

ARTICLE 41. Application fee for Exploration Concession. — When an application for an Exploration Concession is filed, the applicant shall pay an application fee of one thousand pesos in the manner prescribed by the Regulations. In the event that no concession is granted corresponding to such application, the sum paid shall be returned to the applicant less such amount as corresponds to the expenses incurred by the Government in connection with the consideration of the application as determined by the Regulations.

ARTICLE 42. Areas available for Exploration Concessions. — Exploration Concessions may be granted on any lands within the Free, and National Reserve, Areas which are not covered by valid and existing Exploration or Exploitation Concessions, or by Petroleum Drilling Leases acquired under the Petroleum Act (Act No. 2932), or by petroleum mining claims located and held under the Act of Congress of July first, nineteen hundred and two, as amended.

ARTICLE 43. Size and shape of exploration blocks. — Exploration concessions may be granted in lots or blocks as compact as possible, and as closely rectangular as possible in shape except when contiguous with the sea, bays, lakes, rivers, lagoons, roads, or with other concessions already granted which are of irregular boundaries.

"Each block or lot shall not be more than one hundred thousand hectares nor less than twenty thousand hectares in area, and in no case shall the long dimension of the rectangle be more than five times the short dimension: Provided, That the Secretary of Agriculture and Natural Resources may, upon hearing and order, grant exception to the minimum area and shape provisions of this article when reasonably required by adjoining concessions, settlement of conflict, or geographical or geological features that render it impractical to conform with such requirements. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 44. Maximum exploration area a person may acquire. — No person shall be entitled to more than five hundred thousand hectares of exploration areas in any one petroleum region established in accordance with the provisions of article twelve of this Act, nor more than one million hectares in the whole territory of the Philippines.

ARTICLE 45. Rights conveyed under Exploration Concession. — The Exploration Concession conveys upon the concessionaire, his heirs and assigns, from the date of the granting of the concession, and during the exploration period and any extension thereof, the exclusive right to explore the block granted, to do geological and geophysical work, to open test pits, to conduct drilling operations, and to do such other work related to exploration.

ARTICLE 46. Term of exploration concession. — The initial term of an exploration concession shall be not more than four years counted from the date of its issuance: Provided, however, That if the concessionaire has complied with the provisions of this Act and the regulations and with the terms and conditions contained in the contract of concession, the concessionaire is entitled to the grant of an extension of the same for a term of three years, for its entire area or for any part thereof, upon application of the concessionaire made prior to the expiration of the original term. If during the said first extension, the concessionaire has also complied with the provisions of this Act and the regulations and the terms and conditions contained in the contract of concession, upon application of the concessionaire made prior to the expiration of the first extension, the concessionaire likewise is entitled to a further extension of the said concession for its entire area or for any part thereof, for another term of three years.

The extension shall be granted under the same terms and conditions as those contained in the original concession, subject, however, to the provisions of Articles forty-seven and forty-nine of this Act.

No further renewal shall be allowed to any exploration concessionaire at the end of the second extension. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 47. Exploration work obligations. — At the beginning of each calendar year during the life of the concession, the concessionaire shall submit to the Director of Mines, a program of exploration work to be undertaken by the concessionaire with his concession during that year.

He is obligated to spend in the direct prosecution of exploration work within his concession, such as topographic, or geological reconnaissance; mapping or cross sectioning, geophysical surveys by magnetometer, gravimeter or seismograph; core or exploratory drilling; or any combination of the said work, the following amounts:

Initial term:

First year — Not less than fifty centavos per hectare per year, or fraction thereof.

Second year — Not less than one peso per hectare per year, or fraction thereof.

Third year — Not less than one peso and fifty centavos per hectare per year, or fraction thereof.

Fourth year — Not less than two pesos per hectare per year, or fraction thereof.

First extension:

Fifth to seventh year — Not less than two pesos and fifty centavos per hectare per year, or fraction thereof.

Second extension:

Eight to tenth year — Not less than three pesos per hectare per year, or fraction thereof.

The cost of delivered materials or equipment used in the exploration work shall be considered as proper expenditures for such work. The concessionaire shall give satisfactory evidence to the Government of such expenditures in accordance with the Regulations.

Any amount actually spent for exploration work in excess of the minimum amount required for any year or years may be carried forward and credited to exploration work obligations required for the succeeding years during the existence of the concession.

For failure to comply with the minimum work obligations in any one year as herein above stipulated, the concessionaire shall pay to the Government the difference between the minimum amount required and that actually spent for any year. Continued failure to perform the necessary exploration work within the area covered by the concession shall. In addition to the above penalty, result in the cancellation of the concession as provided for in this Act.

In order to guarantee faithful compliance with the required exploration work, a bond of sufficient amount to be fixed by the Regulation, shall be posted by the concessionaire.

[SECTION 18 of RA No 3098.] Reduction and/or moratorium on exploration work obligations and annual exploration taxes. — Notwithstanding the provisions of Article forty-seven of the Petroleum Act of 1949, the minimum amount of work obligations therein required to be spent by a petroleum exploration concessionaire in his concession is hereby reduced by fifty per centum for two consecutive concession years starting with the current concession year when this Act takes effect: Provided, That when circumstances warrant, the Secretary of Agriculture and Natural Resources upon recommendation by the Director of Mines, may extend this period of two years for another period of two years: Provided, further, That upon previous approval by the Secretary of Agriculture and Natural Resources, as recommended by the Director of Mines, said reduced amount work obligation required to be spent for any of the said two concession years may be spent in either of said two concession years.

The Secretary of Agriculture and Natural Resources, upon recommendation of the Director of Mines, may give holders of petroleum exploration concession where the provisions of the Petroleum Act, the regulation and the terms and conditions of the concession contract have been complied with for two or more concession years and where the progress of exploration is such that exploration drilling is the next logical step in the operation in accordance with good petroleum field practice, as indicated by technical reports duly submitted to the Director of Mines showing that adequate geological field work was performed and delineating at least a favorable structure with favorable lithology and with satisfactory paleontological correlations of surface and possibly subsurface rock units, and/or when exploratory drilling is shown to be necessary by satisfactory geophysical survey, a moratorium on work obligations for a period of two concession years from the date of the approval of this Act. The term "exploratory drilling" shall mean the drilling of wells suitable to the production of petroleum and does not include drilling wells suitable only for stratigraphic information. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])]

ARTICLE 48. Work obligations on two or more exploration blocks within any one sedimentary basin. — In case two or more exploration blocks held by the same concessionaire are in the same sedimentary basin, the total amount of work obligations for exploration required therefor in any concession year during the initial term of four years and its extensions may be spent anywhere within the sedimentary basin where such exploration blocks or any portion thereof are located as if said blocks are covered by a single concession. Any amount spent in excess of the minimum required in any concession year for any of the said concessions herein referred to, may, at the election of the concessionaire, be credited against exploration work obligations in the same year for other concessions in the same sedimentary basin, or carried forward and credited against future exploration work obligations on any of the concession herein referred to: Provided, That, in the event such excess expenditure is carried forward to the succeeding year or years and credited against the work obligations for other concessions the concessionaire shall be obligated to continue exploration operations in each of the said other concessions to the extent of twenty-five per centum of the minimum amount of work obligations required in any concession year. Failure to comply with this obligation shall be considered as non-compliance with the provisions of this Act.

However, a concessionaire holding two or more exploration concessions may, upon previous approval of the Secretary of Agriculture and Natural Resources thru the recommendation of the Director of Mines, concentrate the performance of his exploration work obligations required to be performed under Article forty-seven hereof on each of the said concessions held by the said concessionaire by drilling exploratory wells in any one of them whether or not they are located in the same sedimentary basin: Provided, That such approval shall only be given when at least fifty per centum of the total area of all the concessions held by the same concessionaire had already been covered by geological and/or geophysical investigations and the same had already been completed and report thereon submitted to the satisfaction of the Director of Mines. And, provided, further, That the concessionaire has complied with all obligations as to all said concessions. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 49. Annual exploration tax. — hereby repealed (Repealing Article 49 of R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 4304, [June 19, 1965])

ARTICLE 50. Renunciation of areas covered by Exploration Concession. — The holder of an Exploration Concession may, at any time, renounce the whole or any part of the total area covered by his concession: Provided, That, in case of partial renunciation, the portion retained shall be not less than twenty thousand hectares, unless the same is contiguous to another exploration block or blocks held by the same concessionaire, in which case, the total area of all the contiguous blocks thus retained for exploration shall be not less than twenty thousand hectares.

CHAPTER V Exploitation Concession

ARTICLE 51. Definition of Exploitation. — "Exploitation" means all work within the area embraced by an Exploitation Concession that have for their object the production of petroleum within such area, including, but not restricted to, drilling and operating wells, providing and operating pumping and storage facilities; pipe lines and other such work and facilities as are useful for the purpose of making petroleum available for sale, manufacture or refining within or for shipment from such area; but does not include any operation which is a part of manufacturing or refining, or any work outside such area which are a part of a pipe line or other special transportation system.

ARTICLE 52. Application for Exploitation Concession. — Application for Exploitation Concession shall be filed with the Director of Mines in accordance with the provisions of article twenty-eight of this Act. The Regulations shall prescribe the form and contents of application for Exploitation Concession.

ARTICLE 53. Application for exploitation concession covering areas within exploration concession. — An exploration concessionaire, at any time during the life of his concession, including any extension thereof, may select for exploitation purposes one or more parcels from the area covered by his exploration concession. Upon application and fulfillment of all the requirements of this Act, and provided that the total area of such parcel or parcels so selected from any one exploration block shall not exceed one-half of the area of such block, an exploitation concession covering such parcel or parcels, shall be granted to such applicant. Such parcels may be selected by the applicant anywhere within the exploration block, whether contiguously or separately: Provided, That any parcel or parcels so selected and applied for shall be charged against the total area to which the exploration concessionaire is entitled for exploration.

Provided that all the requirements of this Act and the regulations have been complied with, an application for exploitation concession filed as provided for in this article shall, pending the issuance of an exploitation concession covering the areas for which application has been made, operate to confer upon the concessionaire all the rights and obligations which are conferred by this Act through an exploitation concession: Provided, further, That an exploitation concession may also be granted to any person who, without being a holder of an exploration concession, discovers and registers with the Bureau of Mines in accordance with Article sixty-five hereof any natural deposit or seep or natural gas emanation. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 54. Map of the exploitation areas. — In the exercise of the right of exploration, the concessionaire shall prepare at any time during the exploration period, or during extensions, if there by any, the general map of the respective exploration block, showing the exploitation parcel or parcels he may have selected, in preparation to obtaining the Exploitation Concession. This map shall be prepared from an accurate transit and chain survey or from an aerial photographic survey, or the combination of both, and shall be prepared in accordance with existing regulations governing such kinds of survey issued by the Director of Mines, and shall show the location of the boundary monuments of the exploration block and of the different exploitation parcel or parcels within the block and the area and true bearings and distances of the sides thereof. Copies of this map shall accompany the application for Exploitation Concession.

ARTICLE 55. Application fee for Exploitation Concession. — When an application for an Exploitation Concession is filed, the applicant shall pay an application fee of two thousand pesos, in the manner prescribed by the Regulations. In the event that no concession is granted corresponding to such application the sum paid shall be returned to the applicant less such amount as corresponds to the expenses incurred by the Government in connection with the consideration of the application as determined by the Regulations.

ARTICLE 56. Areas available for exploitation. — Areas covered by Exploration Concession held by the applicant, subject to the provisions of article fifty-three of this Act, and areas within the National Reserve, are available for exploitation.

ARTICLE 57. Size and shape of exploitation concession. — The exploitation concession shall be granted in parcel or parcels, rectangular in shape as much as possible, except when contiguous with the seas, bays, lakes, rivers, lagoons, roads, or with other existing concessions of irregular boundaries; or when otherwise approved by the Secretary of Agriculture and Natural Resources.

The area of any exploitation parcel which may be acquired under a single concession shall not be more than fifty thousand hectares nor less than one thousand hectares, and in no case shall the greater dimension of the rectangle be more than five times the other, nor shall the total area of such parcel or parcels so selected for exploitation concession or concessions within an exploration concession exceed one-half of the total area of the exploration block: Provided, That the Secretary of Agriculture and Natural Resources may, upon hearing and order, grant exception to the minimum area and shape provisions of this article when reasonably required by adjoining concessions, settlement of conflict, or geographical or geological feature that render it impractical to conform with such requirement. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 58. Maximum exploitation area that may be acquired. — No person shall be allowed to hold more than two hundred and fifty thousand hectares of exploitation area in any one petroleum region, nor more than five hundred thousand hectares in the whole territory of the Philippines.

ARTICLE 59. Rights conveyed under exploitation concession. — An exploitation concessionaire, his heirs and assigns, has the exclusive right, during the term of the concession, to drill within the boundaries projected vertically downward of the parcel or parcels covered by his concession, to extract within the boundaries thereof the substances referred to in this Act, to utilize them once they are extracted, and to do all acts authorized within the scope of exploitation, as defined in Article fifty-one this Act, subject to the provisions of this Act and the regulations that may be issued by the Secretary of Agriculture and Natural Resources in accordance with powers conferred upon him in this Act. casia

"In case roads and/or bridges are constructed by the concessionaire in connection with the operation of his exploitation concession, the same shall be available for public use when such use shall not interfere with or destroy the use thereof by the concessionaire in his operation as may be agreed upon between the Secretary of Agriculture and Natural Resources and the concessionaire: Provided, however, That the concessionaire shall have no responsibility or liability to the government or to the public for the condition, construction, or maintenance of such roads and/bridges. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 60. Exploitation work obligations. — At the beginning of each calendar year during the life of the concession, the concessionaire shall submit to the Director of Mines, a program of exploitation work proposed to be undertaken by the concessionaire within his concession during that year.

The concessionaire shall commence drilling operations within one year from the date the Exploitation Concession is granted within the area covered by the concession and shall continue diligently such drilling operations in accordance with good oil field practice. He shall be obligated to develop and bring into production the exploitation area granted to him and any discovery areas that he may find, and to continue such development and production until at least the domestic consumption requirements of petroleum in the Philippines, determined in consultation with the Secretary of Agriculture and Natural Resources, are met by the total net production from all sources of indigenous production in the Philippines, if the petroleum deposit discovered by the concessionaire shall permit such development in accordance with good petroleum engineering practice.

ARTICLE 61. Exploitation work obligations in two or more Exploitation Concessions in the same petroleum region. — A person holding two or more Exploitation Concessions in the same petroleum region, may be permitted to concentrate the exploitation work obligations required for all the Exploitation Concessions held by him in the same petroleum region, within any one of his Exploitation Concession, as long as the drilling operations are diligently conducted with a creditable expenditure and in accordance with a drilling program: Provided, however, That no Exploitation Concession shall remain for a period of more than five consecutive years without drilling operations. Such work may be credited only upon prior written approval of the Secretary of Agriculture and Natural Resources.

ARTICLE 62. Production operations. — Once production is established in an Exploitation Concession, production operations on the concession may not be suspended for more than six months without prior written approval of the Secretary of Agriculture and Natural Resources.

Suspension of operations shall in no case be authorized for more than two years at any one time, except in case of force majeure.

ARTICLE 63. Existing Petroleum Drilling Leases and petroleum mining claims may come under the provisions of this Act. — Holders of Petroleum Drilling Leases under the provisions of the Petroleum Act (Act No. 2932) and of petroleum mining claims located and held under the provisions of the Act of Congress of July first, nineteen hundred and two, as amended, may surrender their rights thereto by filing applications with the Secretary of Agriculture and Natural Resources for Exploitation Concessions under the provisions of this Act, and the latter may, upon receipt of such applications, grant Exploitation Concessions covering the same, subject to all the conditions, obligations, and privileges provided for under this Act.

ARTICLE 64. Annual exploitation tax. — Each holder of an Exploitation Concession shall pay throughout the life of such concession, in the manner prescribed by the Regulations, an exploitation tax as follows:

During the first five-year period, not less than fifty centavos per hectare per year, or fraction thereof.

During the second five-year period, not less than one peso per hectare per year, or fraction thereof.

During the third five-year period, not less than one peso and fifty centavos per hectare per year, or fraction thereof.

During the fourth five-year period, not less than three pesos per hectare per year, or fraction thereof.

During the fifty five-year period, not less than five pesos per hectare per year, or fraction thereof.

Thereafter, during the period or periods of its renewal, if any, not less than five pesos per hectare per year or fraction thereof, unless modified by the Secretary of Agriculture and Natural Resources.

ARTICLE 65. Royalty. — Exploitation concessionaires shall pay to the Government a royalty which shall not be less than twelve and one-half per cent of the petroleum produced and saved, less that consumed in the operations of the concessionaire in the working of such Exploitation Concession: Provided, That natural gas returned to the formation shall not be subjected to royalty.

The royalty paid to the Government on petroleum or natural gas produced from the date commercial production is started, from well or wells within the radius of one kilometer from any discovered, located, registered and verified petroleum natural deposit or seep or natural gas emanation, shall be deducted by ten per cent thereof, which deduction shall be due and payable to the discoverer of the said natural deposit or seep or gas emanation: Provided, That the petroleum natural deposit or seep or gas emanation is not covered by another discovery previously registered in the Bureau of Mines: And provided, further, That the discovery and location are made and registered prior to the date of the granting of an Exploration or Exploitation Concession, covering the area where such petroleum natural deposit or seep or gas emanation was discovered.

The discoverer shall mark the point of discovery with prominent and permanent object and with a placard stating the name of the discovery, the name of the discoverer, and the date of discovery and location, within a period of thirty days from the date of the discovery or, if discovered before the approval of this Act, within thirty days after such approval.

Declaration of discovery and location describing specifically the facts and circumstances of the discovery, and containing such other matters as may be required by the Director of Mines, shall be prepared under oath by the locator or discoverer who shall register the same in the office of the Bureau of Mines, Manila, within ninety days from the date of location. The Director of Mines shall register such declaration upon payment of the registration fee of ten pesos and submittal of a sample of the oil or natural gas discovered. All discoveries not duly declared and registered within the period herein set forth, shall be considered as having been abandoned by the discoverer.

The rights acquired by the discoverer shall be based on actual discovery, followed by registration within the period provided for in this article. The rights of the discoverer to his discovery shall expire ten years after the date of registration: Provided, however, That if within the said period an Exploration or Exploitation Concession is granted covering the oil seeps or natural deposits or natural gas emanations discovered, the rights of the discoverer shall be deemed to continue from the date the Exploration or Exploitation Concession is granted until ten years from the date commercial production is first started from any well or wells within the discovery area.

ARTICLE 66. Exploitation tax credited against royalty. — All exploitation taxes to which any concessionaire shall be liable under article sixty-four of this Act, during any year on any or all Exploitation Concessions held by him in the same petroleum region, shall be credited against the total royalty payments on all the petroleum produced by the concessionaire from any or all the Exploitation Concessions held by him within the same petroleum region and paid by such concessionaire in the same year: Provided, That, such deduction shall apply only to amounts due for exploitation tax in excess of fifty centavos per hectare per year.

For the purpose of computing the deduction due under this article, the value of any royalty paid in kind shall be converted to cash as provided for in article sixty-eight.

ARTICLE 67. Manner for payment of royalty. — Royalty may be paid either wholly or partly in kind, or wholly or partly in cash, at the election of the Secretary of Agriculture and Natural Resources, but such election shall not be changed during any quarter for which it has once been made, nor shall it be changed for any succeeding quarter without written notice to the concessionaire at least thirty days prior to the commencement of such quarter.

When the Secretary of Agriculture and Natural Resources elects to receive the royalty wholly or partly in kind, the concessionaire shall make delivery thereof at the place of production or at any established receiving and storage station on the transportation system which is employed by the concessionaire for the transportation of his own petroleum or similar kind, as elected by the Secretary of Agriculture and Natural Resources.

When the Secretary of Agriculture and Natural Resources elects to receive the royalty in cash, the same shall be paid quarterly in advance, and the amount of royalty to be paid in any quarter shall be determined by the petroleum production during the next preceding quarter.

The procedure for determining the amount of royalty due and the payment of such royalty, except as specified in this Act, shall be fixed by the Regulations.

ARTICLE 68. Liquidation of royalty in cash. — When the Secretary of Agriculture and Natural Resources elects to have the royalty paid in cash, as provided for in article sixty- seven of this Act, the market value of the petroleum at the place of its production shall be used for the calculation of the amount due; and it shall be determined by taking as a basis the average price of petroleum of the same quality, during the preceding quarter, in the governing market or markets as specified in the Regulations; and deducting from such average price the cost of transportation from the place of production to such markets; and deducting also the cost of any processing or treatment which is necessary to make the petroleum suitable for such transportation.

For this purpose the cost of transportation shall include all actual costs inherent therein, such as freight according to the usual tariffs, port fees, storage costs, pumping costs, and the costs of operating and maintaining the facilities provided expressly for such transportation. Similarly the cost of processing or treatment shall include all actual costs inherent therein, such as for chemicals, stabilization, compression, and the cost of operating and maintaining the facilities provided expressly for such processing or treatment.

The Secretary of Agriculture and Natural Resources is empowered to enter into agreement with the concessionaire for the purpose of determining the market value of petroleum and the deductions to be allowed in computing the market value at the place of production, for the purpose set forth in this article.

ARTICLE 69. Acceptance of royalty payments. — Within sixty days following the end of each month during which the royalty has been paid in kind, or following the end of each quarter in which royalty has been paid in cash, the Secretary of Agriculture and Natural Resources shall notify the concessionaire in writing that such payment is accepted in full discharge of the corresponding obligations as fixed by this Act; or that such is not the case for certain stated reasons, in which latter case the procedure fixed in the Regulations shall be followed for the purpose of making any necessary corrections. Failure of the Secretary of Agriculture and Natural Resources to thus notify the concessionaire of objection to the royalty payments made, within the foregoing time limits, shall be construed as acceptance by the Secretary of Agriculture and Natural Resources of such payments.

Acceptance of royalty payments as provided for in this article shall be deemed irrevocable.

ARTICLE 70. Field storage tanks and storage. — Exploitation concessionaire is obligated to construct and maintain at, or in the vicinity of, the place or places of production, storage tanks of sufficient capacity to operate the producing field or fields in accordance with good oil field practice.

The holder of such concession is under obligation to store, for a period not in excess of thirty days, such royalty in kind, free of expense to the Government. Should the Government have no adequate facilities for the handling and/or storage of such petroleum after said period, the concessionaire shall supply facilities for the handling and/or storage of the same for a reasonable charge, which period and charge shall be as mutually agreed upon between the Secretary of Agriculture and Natural Resources and the concessionaire in advance: Provided, That, in no event shall the concessionaire be required to store beyond such thirty days more than one hundred thousand barrels of such petroleum at any one time, nor of any petroleum other than that produced within the area held by the concessionaire.

ARTICLE 71. Exploitation concessionaire may be obliged to refine crude oil in the Philippines. — The Secretary of Agriculture and Natural Resources may, after due investigation, require an exploitation concessionaire to refine part or all of the crude oil produced in his concession, in any refinery established in the Philippines in accordance with the provisions of this Act: Provided, That, there is such refinery with sufficient capacity and adequate facilities to handle such crude oil in accordance with good refining practice: And provided, further, That the quantity of such crude oil of the concessionaire that may be required to be refined in the Philippines in relation to the total net production from his concession shall not exceed the proportional amount that the total domestic requirements bear to the total net production from all indigenous sources in the Philippines.

ARTICLE 72. Term of Exploitation Concession. — The term of an Exploitation Concession shall not exceed twenty-five years counted from the date of its issuance, renewable for another twenty-five years at the option of and upon application of the concessionaire made prior to the expiration of the original term.

ARTICLE 73. Renunciation of areas covered by exploitation concession. — The holder of an exploitation concession, may, at any time, renounce the whole or any part of the total area covered by his exploitation concession. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

CHAPTER VI Refining Concession

ARTICLE 74. Definition of Refining. — The term "Refining" means the processing or treating of petroleum by chemical or physical means for the purpose of making or separating marketable products; not including, however, such operations, separate from the foregoing, as gas compression, removal of noxious gases, crude oil stabilization or treatment for emulsion, or any other operation which has as its principal aim the avoidance of hazard or loss, or which is incidental to production or to transportation.

ARTICLE 75. Application for Refining Concession. — Application for Refining Concession shall be filed with the Director of Mines in accordance with article twenty-eight of this Act.

When the granting of a Refining Concession is obligatory upon the Government by reason of the provisions of article eleven of this Act, and provided that the requirements of this Act and of the Regulations have been complied with, an application for Refining Concession filed as provided in article twenty-eight shall operate to confer upon the concessionaire all the rights and obligations which are conferred by this Act through such concession, pending the execution of the contract of concession. The Secretary of Agriculture and Natural Resources may, in his discretion, grant a Refining Concession to any person duly qualified under the provisions of this Act even though he is not a holder of an Exploitation Concession. Likewise a refining concession may be granted to any person who, without being a holder of an Exploitation Concession discovers and registers with the Bureau of Mines under the provision of article sixty-five hereof, any natural deposit of oil or seep or emanation of gas.

ARTICLE 76. Refining application fee. — When an application for a Refining Concession is filed, the applicant shall pay an application fee of two thousand pesos, in the manner prescribed by the Regulations. In the event that no concession is granted corresponding to such application, the sum paid shall be returned to the applicant less such amount as corresponds to the expenses incurred by the Government in connection with the consideration of the application as determined by the Regulations.

ARTICLE 77. Rights conveyed under Refining Concession. — Refining Concession confers upon the concessionaire the non-exclusive right to provide facilities for the manufacture of, and to manufacture, petroleum products, subject to the provisions of this Act; and to carry out such auxiliary works and operations as are essential to the successful conduct of the undertaking, such as, but not limited to, the generation of steam and electricity; the treatment and use of water; the production or regeneration of chemicals used in manufacturing; the fabrication and filling of containers; the erection of shops, warehouses, and other buildings; the construction and operation of communication systems and roads within and for access to the works; and the provision and operation of facilities for receiving, storing, and shipping materials or products and for their transportation within or between parts of the works to which the concession relates.

It shall be understood that all auxiliary works and operations and the products thereof to which the rights provided in this article apply, shall be for the exclusive use of the concessionaire in the operation of his concession or concessions subject to the limitations set forth in article seventy-eight hereof: Provided, however, That all roads and bridges constructed by the concessionaire except those within the compound of the refinery, shall be available for public use, except when otherwise agreed upon between the Secretary of Agriculture and Natural Resources and the concessionaire.

ARTICLE 78. Utilization of refining capacity. — The holder of a Refining Concession shall have the preferential right to utilize his installations for the refining or manufacture of petroleum produced by him from his concession, but is obligated to utilize any remaining capacity for the refining or manufacture, pro rata, of such other petroleum as may be offered by others for refining or manufacture, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources.

When a refining concessionaire is also an exploitation concessionaire, the Secretary of Agriculture and Natural Resources may require that the royalty in kind due to the Government from the same concessionaire, or an equivalent amount of petroleum of the Government from other sources, be refined or manufactured, pro rata, with that owned by the refining concessionaire, up to the capacity of the installation; and in all cases petroleum owned by the Government shall have priority over all other petroleum for the utilization of the refining or manufacturing capacity in excess of that required to refine or manufacture petroleum owned by the refining concessionaire.

Procedure for the determination of refining rates and the conditions governing the refining of petroleum other than that owned by the refining concessionaire shall conform to the Regulations.

ARTICLE 79. Petroleum produced under this Act shall be given refinery preference. — Any established refinery may be required by the Secretary of Agriculture and Natural Resources to refine crude petroleum produced in the Philippines in preference over any imported crude petroleum.

ARTICLE 80. Term of Refining Concession. — The term of a Refining Concession shall not exceed twenty-five years counted from the date of its issuance, renewable for another twenty-five years, upon application of the concessionaire filed prior to the expiration of the original term.

ARTICLE 81. Right to establish a refinery may be ceded but concessionaire may be required to establish a refinery under certain conditions. — An exploitation concessionaire may assign, transfer, or cede his right to establish a refinery in the Philippines granted him under article eleven of this Act in favor of any person qualified under the provisions of this Act, upon prior written permission of the Secretary of Agriculture and Natural Resources. However, the Secretary of Agriculture and Natural Resources may, after due study of the economic and technical problems involved on the part of the exploitation concessionaire and of the need of the Philippines for a suitable refinery, require an exploitation concessionaire, after he shall have developed a recoverable petroleum reserve of one hundred forty million barrels or more in any one or more of his concessions granted under this Act, capable of maintaining a production rate of ten thousand barrels a day for at least fifteen years, to establish in the Philippines a refinery of a capacity which shall be not less than ten thousand barrels per day.

ARTICLE 82. Renunciation of Refining Concession. — Any Refining Concession may be renounced at any time, except when the undertaking to build a refinery is imposed upon an Exploitation Concessionaire under the provisions of articles nineteen and eighty-one of this Act, in which case, the renunciation shall be subject to the prior written approval of the Secretary of Agriculture and Natural Resources.

Renunciation extinguishes all rights granted by the concession, but does not relieve the concessionaire from making any payments due to the Government.

CHAPTER VII Pipeline Concession

ARTICLE 83. Application for Pipe Line Concession. — Application for Pipe Line Concession shall be filed with the Director of Mines in accordance with article twenty-eight of this Act.

When the granting of a Pipe Line Concession is obligatory upon the Government by reason of the provisions of article eleven, and provided, that all the requirements of this Act and of the Regulations have been complied with, an application filed shall operate to confer upon the concessionaire all the rights and obligations which are conferred by this Act through such a concession, pending the execution of the contract of concession.

Pipe Line Concession may also be granted to any person legally qualified under this Act, who is not a holder of an Exploitation or Refining Concession, upon his filing with the Director of Mines an application therefor.

ARTICLE 84. Pipe Line application fee. — When an application for a Pipe Line Concession is filed, the applicant shall pay an application fee of two thousand pesos, in the manner prescribed by the Regulations. In the event that no concession is granted corresponding to such application, the sum shall be returned to the applicant less such amount as corresponds to the expenses incurred by the Government in connection with the consideration, as determined by the Regulations.

ARTICLE 85. Rights conveyed under Pipe Line Concession. — A pipe line concessionaire acquires the non-exclusive right to transport petroleum, by means of, and through, a pipe line or system of pipe lines, between the sources of production and/or refining and the places defined in the Pipe Line Concession, in accordance with the provisions of this Act and the Regulations.

This concession right includes the construction and operation of pipe lines, pumping or compressing stations, storage tanks, gas tanks, power plants, shops, storehouses and other buildings, water supply and communication systems, roads, and such other equipment or facilities as may be needed for the purpose of the concession.

All such auxiliary works and operations and the products thereof shall be for the exclusive use of the concessionaire in the operation of his concession: Provided, however, That all roads and bridges constructed by the concessionaire, except as may otherwise be agreed upon between the Secretary of Agriculture and Natural Resources and the concessionaire, shall be available for public use.

ARTICLE 86. Pipe line concessionaire as common carrier. — A pipe line concessionaire shall have the preferential right to utilize his installations for the transportation of petroleum owned by him, but is obligated to utilize any remaining transportation capacity pro rata for the transportation of such other petroleum as may be offered by others for transport, and to charge without discrimination such rates as may have been approved by the Secretary of Agriculture and Natural Resources.

When the pipe line concessionaire is also an exploitation concessionaire, the Secretary of Agriculture and Natural Resources may require that the royalty in kind of the Government received from the same concessionaire, be transported, pro rata, with that owned by the concessionaire from the same concession; and in all cases the petroleum of the Government shall have priority over all other petroleum in the utilization of the excess capacity of the pipe line over that required to transport petroleum owned by the pipe line concessionaire.

Procedure for the determination of pipe line transportation rates and the conditions governing the transportation of petroleum other than that owned by the concessionaire shall conform to the Regulations.

ARTICLE 87. Term of Pipe Line Concession. — The term of a Pipe Line Concession shall not exceed twenty-five years counted from the date of its issuance, renewable for another twenty-five years, upon application of the concessionaire filed prior to the expiration of the original term.

ARTICLE 88. Renunciation of Pipe Line Concession. — Any Pipe Line Concession may be renounced at any time, except when the undertaking to build a pipe line is imposed upon an Exploitation Concessionaire under the provisions of article nineteen of this Act, in which case, the renunciation shall be subject to the prior written approval of the Secretary of Agriculture and Natural Resources.

Renunciation extinguishes all rights granted by the concession, but does not relieve the concessionaire from making any payments due to the Government.

CHAPTER VIII Penalties and Extinction of Rights

ARTICLE 89. Cancellation of concession for falsehood or omission in application. — The statements made in the application or made in support thereof, shall be considered as conditions and essential parts of the concession that may be granted by virtue of such application, and any falsehood in those statements or omission of facts which may alter, change, or affect, substantially the facts set forth in said statements may cause the cancellation of the lease granted.

ARTICLE 90. Other causes for cancellation of concession. — (a) Exploration Concessions may be cancelled under any of the following causes:

1. For failure of the concessionaire to perform the work obligations required by article forty-seven of this Act for two consecutive years; and

2. For failure to pay for two consecutive years the exploration tax due thereon, as required by article forty-nine of this Act.

(b)Exploitation Concessions may be cancelled under any of the following causes:

1. For failure of the concessionaire to perform the exploitation work obligations as required under the provisions of articles sixty and sixty-one of this Act, for two consecutive years;

2. For suspending production operations for more than six months without prior written approval of the Secretary of Agriculture and Natural Resources as provided for in article sixty-two of this Act;

3. For failure to pay for two consecutive years the annual exploitation tax due thereon, as required by article sixty-four of this Act;

4. For failure to deliver or pay to the Government its royalty within one year from the date such royalty becomes due.

(c)Refining and Pipe Line Concessions may be cancelled for failure of the concessionaire to begin the construction of a refinery and pipe line, as the case may be, within one year from the date of the issuance of such concessions.

ARTICLE 91. Procedure for cancellation. — Before any concession is cancelled for cause or causes mentioned in this Act, the concessionaire shall first be notified in writing of such cause or causes, and shall be given an opportunity to be heard, and to show cause why the concession shall not be cancelled. If upon investigation, the Secretary of Agriculture and Natural Resources shall find the concessionaire to be in default, the latter shall be given an opportunity to correct such default. If the concessionaire shall continue to be so in default for a period of ninety days from the date of the decision finding him in default, the concession may be cancelled in an order to that effect, copy of which shall be furnished to the concessionaire, and which order shall become final thirty days from receipt thereof, unless the concessionaire decides to take advantage of the provisions of Article one hundred seven of this Act, in which case the concession shall continue to be in force until, and if, a competent court or board of arbitrators decides otherwise; and then the concessionaire shall have ninety days after any such decision or award to correct the default. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 92. Extinction of rights. — Rights acquired by virtue of a concession granted under this Act shall become extinguished upon the expiration of its term including the extensions or renewals thereof, if any, or upon the cancellation or renunciation of such concession.

In the event of such extinction of rights, any sum payable to the Government by the concessionaire and then unpaid shall become due and payable forthwith, the property of the concessionaire shall be disposed of in accordance with the provisions of article ninety-three of this Act, and the concession contract shall be surrendered to the Secretary of Agriculture and Natural Resources.

ARTICLE 93. Title to areas, property, and equipment after renunciation, cancellation, or expiration of a concession. — (a) Upon the renunciation, cancellation, or expiration of an Exploration or Exploitation Concession, the area covered thereby shall automatically become part of the National Reserve.

(b)Upon the renunciation, cancellation, or expiration of an Exploration Concession, or of an Exploitation Concession within the first term of twenty-five years or within the first fifteen years of its renewal, if any, as provided for in this Act, the title rights to all apparatus, materials, equipment, supplies and other personal properties, all works, buildings and other facilities and structures which the concessionaire places on the land under the terms of the concession, including but not limited to drilling pipe, warehouse stocks, automotive, aviation and marine equipment, shall remain vested in the concessionaire, and the concessionaire shall have the right to remove and export the same at any time within one year counted from the date the concessionaire shall cease to retain the right to use the lands subject to the concession on which the said property is located: Provided, however, That the Government shall acquire title to all properties not so revoked at the end of the said one-year period: Provided, further, That the Government shall have the exclusive right of option, but not the obligation, to buy from the concessionaire any or all of the properties which the concessionaire has the right to remove under this paragraph within ninety days from the date the concession is renounced, cancelled or terminated: And provided, finally, That the concessionaire shall maintain said properties, pending decision of the Government to purchase the same, in as good condition as the condition of said properties on the date of the said renunciation, cancellation or termination of the concession, ordinary wear and tear and damage caused by circumstances beyond the control of the concessionaire excepted. The price of the said properties shall be fixed by agreement between the parties but in case of any disagreement as to the price, the same shall be submitted to a board of appraisal of three members to be appointed, one, by the Secretary of Agriculture and Natural Resources, another by the concessionaire and the third, by the two appraisers appointed by the two parties, which board shall determine the price to be paid by the Government for the said properties. Roads, bridges, ports, wharves, and casings in the ground shall become the property of the Government without any permanent.

(c)In case of renunciation, cancellation or termination of the Exploitation Concession after the fifteenth year from the date of the renewal, if any, of the concession, all the property mentioned in the preceding paragraph shall become the property of the Government without payment or indemnification to the concessionaire.

(d)The above provisions do not apply to any refinery built by the concessionaire as said refinery shall continue to be the exclusive property of the owner thereof even after the termination of the concession: Provided, That roads and bridges constructed by the concessionaire shall become the property of the Government.

Article 93-A. Delay in the payment of tax or royalty. — Where the amount of tax or royalty imposed by this Act or concession contract is not paid on the due date, there shall be collected as part of the said tax or royalty a surcharge of one per centum thereof per month from the due date until they are paid.

Article 93-B. Illegal obstruction to government officials. — Any person who illegally prevents of obstructs the Secretary of Agriculture and Natural Resources or the Director of Mines or any of their representatives, in the performance of their duties under the provisions of this Act, shall be punished by a fine of not more than three hundred pesos or by imprisonment for not more than six months or both.

Article 93-C. Illegal obstruction to concessionaires. — Any person who illegally prevents or obstructs the holder of any concession granted under this Act in his operation shall be punished by a fine of not more than three hundred pesos or by imprisonment for not more than six months or both.

(Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

CHAPTER IX Officials in Charge and Duties

ARTICLE 94. The Secretary of Agriculture and Natural Resources as executive officer. — The Secretary of Agriculture and Natural Resources shall be the executive officer charged with carrying out the provisions of this Act, through the Director of Mines who shall act under his immediate supervision and control. As such executive officer, the Secretary of Agriculture and Natural Resources shall be vested with the authority to prescribe rules and regulations and issue orders which he may find necessary to effectuate the provisions and purposes of this Act.

ARTICLE 95. Authority of Secretary of Agriculture and Natural Resources to create necessary offices. — The Secretary of Agriculture and Natural Resources is authorized to create an Administration Unit and a Technical Board, both under the Director of Mines.

The Administration Unit shall be under the supervision and control of the Director of Mines and shall be charged with the administration of petroleum lands, the preparation of forms and regulations, the settlement of disputes, and the enforcement of the provisions of this Act with the advice of the Technical Board.

The Technical Board shall consist of at least one petroleum engineer and one petroleum geologist, with the Director of Mines ex-officio chairman thereof. The said Board shall have, among others, the following functions:

(a)To act in an advisory or consultative capacity on different technological matters relative to the administration and disposition of petroleum lands under this Act, and on petroleum operation and industry;

(b)To look into the qualifications of applicants for concessions under this Act;

(c)To recommend whether or not lands within the National Reserve Areas shall be offered for concession and in case it is so offered, to study all applications for concessions within said areas with a view to determining the relative merits thereof and to submit to the Secretary of Agriculture and Natural Resources its findings and recommendations thereon;

(d)To determine the relative merits of the conflicting applications for concessions covering lands within Free Areas;

(e)To check on the performances of concessionaires and to determine whether the obligations imposed by this Act and the Regulations promulgated thereunder are being complied with;

(f)To determine the maximum efficient rate of withdrawal from each well or oil field;

(g)To supervise production operations to insure conservation of reservoir energy and the optimum recovery from the petroleum deposits in the different oil fields;

(h)In general, to study ways and means to insure the efficient administration of petroleum lands and the effective enforcement of the provisions of this Act and the Regulations; and

(i)To keep and maintain a complete record as possible on all phases of exploration, development and production of petroleum in the Philippines, including but not limited to geological and geophysical data, well and production records, petroleum engineering studies, computation of petroleum reserve and to prepare therefrom such reports, articles, and bulletins as may be deemed necessary for the proper information of the Government and/or the public.

ARTICLE 96. Funds for salaries and expenses. — For the expenses, including salaries and wages of the personnel, of the Administration Unit and of the Technical Board authorized to be created in accordance with article ninety-five of this Act, a sum of two hundred thousand pesos is hereby appropriated from the funds of the National Treasury not otherwise appropriated. Hereafter the same shall be included in the General Appropriation Act.

CHAPTER X Final Provisions

ARTICLE 97. Bond for performance. — Prior to the issuance of a concession, except the Non-Exclusive Exploration Permit, the concessionaire shall post a bond in favor of the Government in the sum to be fixed by the Regulations and with surety or sureties satisfactory to the Secretary of Agriculture and Natural Resources, conditioned upon the faithful performance by the concessionaire of any or all of his obligations under the concession.

ARTICLE 98. Share of private landowners. — In case an Exploration or Exploitation Concession covers, in whole or in part, private lands title to which has been finally adjudicated by a court of competent jurisdiction, the exploration or exploitation tax due to the Government for the area of such private lands, shall be reduced by ten per cent of the same, which reduction shall be the landowner's share. In the case of lands title to which has not been finally adjudicated all the exploration and exploitation tax for said areas due to the Government shall be paid to the Collector of Internal Revenue or his duly authorized deputy, subject to the rule and regulations of the Bureau of Internal Revenue. In any case, the right of private owner to recover ten per cent share when and if his title shall have been finally adjudicated in his favor shall be respected and for such purpose the Government shall hold the same until such title has been so finally adjudicated.

ARTICLE 99. National emergency measures. — Concessions granted under this Act shall be subject to the rights of the Government, in case of and during the period of war or national emergency, to pass such lawful measures, as it may consider necessary, requisitioning for its use and/or restricting the sale or disposal of all products produced under the terms of the concessions and/or interfering with the free movement thereof, upon just compensation paid to the concessionaires.

ARTICLE 100. Disposition of substances other than petroleum. — In the event that substances other than petroleum, as defined in article two, should occur naturally and be produced with petroleum, the exploitation concessionaire may separate such other substances at his own expense; Provided, That in the event that any such other substances be sold, the value thereof shall be taken into account in fixing the value of petroleum for the purpose of liquidating royalty in cash as provided in article sixty-eight: And provided, further, That if the Secretary of Agriculture and Natural Resources elects to receive such other substances in kind the concessionaire shall, upon request of the Secretary of Agriculture and Natural Resources, separate and deliver to the Government such substances through the facilities of the concessionaire and at the expense of the Government.

ARTICLE 101. Helium rights reserved. — The Government reserves the right to take all helium from any gas produced by the concessionaire and the right to erect, maintain, and operate on lands covered by the concession, all reduction works and other equipment necessary for the extraction of helium. The Secretary of Agriculture and Natural Resources shall prescribe the necessary rules and regulations governing the delivery to the Government of gas containing helium for the extraction thereof.

ARTICLE 102. Work obligations, taxes, royalties not to be changed. — Work obligations, special taxes and royalties which are fixed by the provisions of this Act or by the concession for any of the kinds of concessions to which this Act relates, are considered as inherent on such concessions after they are granted, and shall not be increased or deceased during the life of the concession to which they apply; nor shall any other special taxes or levies be applied to such concessions, nor shall concessionaires under this Act be subject to any provincial, municipal, or other local taxes or levies; nor shall any sales tax be charged on any petroleum produced from the concession or portion thereof, manufactured by the concessionaire and used in the working of his concession. All such concessionaires, however, shall be subject to such taxes as are of general application, in addition to taxes and other levies specifically provided in this Act.

ARTICLE 103. Customs duties. — During the first five years following the granting of any concession, the concessionaire may import free of customs duty, all equipment, machinery, material, instruments, supplies and accessories.

No exemption shall be allowed on goods imported by the concessionaire for his personal use or that of any others; nor for sale or for re-export; and if any goods on which exemption has been allowed be thus used or disposed of, the concessionaire is obliged to make a report to the Secretary of Agriculture and Natural Resources to that effect and to pay such import duty as is due.

ARTICLE 104. Exploration of petroleum. — No export tax shall be levied upon petroleum produced from exploitation concessions granted under this Act as well as on equipment, machinery, materials, instruments, supplies and accessories imported and used exclusively in the furtherance of the operations of the concessionaire under this Act if exported any time after such bona fide use thereof. As to equipment, materials, instruments, supplies and accessories mentioned in this article, in order to qualify for the exemption, the concessionaire shall notify the Secretary in writing before the date of the export and the failure to do so shall constitute a forfeiture of the exemption from the export tax which shall become promptly payable. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 105. Compulsory collection. — In the event of failure by a concessionaire to pay any tax or royalty due under the provisions of this Act within six months of the date upon which they are due, the Government may resort to compulsory collection under the provisions of applicable laws.

ARTICLE 106. Inspection of operations and examination of books and accounts. — The Secretary of Agriculture and Natural Resources and the Director of Mines shall have authority to send their delegates or representatives to inspect any operations of the concessionaire at all reasonable times and to examine all the books and accounts pertaining to operations or conditions related to payment of taxes and royalties under this Act, and to carry out any other inspections authorized by law.

The concessionaire shall furnish to such delegates or representatives all technical and accounting data specified in the Regulations, and shall give them ample facilities and assistance to discharge their duties as such representatives and inspectors.

For the purpose of enabling proper examination as provided for in this article, each concessionaire shall be obligated to retain within the country all original records or original carbon copies thereof which are essential for the purpose of determining the amount of taxes and royalties due to the Government, except as may be agreed upon between the Secretary of Agriculture and Natural Resources and the concessionaire.

ARTICLE 107. Settlement of disputes by agreement. — For the purpose of settling or terminating any controversy arising out of the provisions of this Act, other than those arising out of conflict of applications, the Secretary of Agriculture and Natural Resources is authorized, to enter into agreement with any petroleum concessionaire, and in case of their failure to come to such an agreement, the Secretary of Agriculture and Natural Resources shall render his decision thereon, from which decision the concessionaire adversely affected thereby, may bring the matter to the court of competent jurisdiction within forty-five days from the date of his receipt of a copy of said decision. Failure to take such action within the said period, shall make such decision final and binding upon the concessionaire.

Such agreement between the Secretary of Agriculture and Natural Resources and a concessionaire may be reached either with or without the intervention of arbitrators selected by the parties to the controversy.

ARTICLE 108. Definition of "waste. " — The term "waste" shall specifically include among other things the following:

(a)The operation of any petroleum well or wells with an inefficient gas-oil ratio.

(b)The drowning with water of any stratum or part thereof capable of producing oil or gas, or both oil and gas, in paying quantities.

(c)Permitting any natural gas well to burn wastefully.

(d)Physical waste or loss incident to, or resulting from, so drilling, equipping, locating, spacing, or operating well or wells as to reduce or tend to reduce the total ultimate recovery of crude petroleum oil or natural gas from any pool.

(e)Waste or loss incident to, or resulting from, the unnecessary, inefficient, excessive or improper use of the reservoir energy, including the gas energy or water drive, in any well or pool.

(f)Surface waste or surface loss, including the storage either permanent or temporary of crude petroleum or the placing of any product thereof, in open pits or earthen storage, and all other forms of surface waste or surface loss, including unnecessary or excessive surface losses, or destruction without beneficial use, either of crude petroleum or of natural gas.

(g)The production of crude petroleum or natural gas in excess of transportation or market facilities or reasonable market demand.

ARTICLE 109. Prevention of waste. — All concessionaires, operators, contractors, or drillers, pipe line companies, petroleum refining companies, or gas distributing companies, drilling for or producing petroleum or petroleum products, or piping petroleum for any purpose, shall use every possible precaution in accordance with the most improved methods to stop and prevent waste of petroleum or natural gas in drilling and producing operations, storage or in piping or distributing, and shall not wastefully utilize petroleum or natural gas or allow same to leak or escape from natural reservoirs, wells, tanks, containers, or pipes.

ARTICLE 110. Rules and regulations regarding conservation of petroleum. — Rules and regulations may be issued which shall require concessionaires to utilize in their exploration and exploitation operations the latest and most improved methods and devices to prevent waste in petroleum as well as to prevent oil, oil-field brine or other oil-field contamination from causing pollution or otherwise damaging streams, surface or underground water supply, and valuable mineral deposits. The Secretary of Agriculture and Natural Resources may also issue orders which shall control the rate of production from any well in the interest of conservation of the petroleum resources so as to prevent waste, as elsewhere defined in this Act. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 111. Applications filed prior to approval of this Act. — Applications for geological exploration, petroleum drilling lease, concession, or contract of service, presented prior to the promulgation of this Act to the Philippine Oil Commission, the Secretary of Agriculture and Natural Resources, or the Director of Mines, which applications have not been granted, or if granted, had already expired, or are no longer in effect at the time this Act becomes effective, shall remain without effect.

ARTICLE 112. Transfer and assignment. — No assignment or transfer in whole or in part of the rights of the concessionaire shall be made without the previous written approval of the Secretary of Agriculture and Natural Resources. Such approval shall be granted after (1) the proposed assignee or transferee is found by the Secretary to be duly qualified to acquire or hold concessions under the provisions of Article thirty-one of this Act and other applicable laws, and if said assignee or transferee is or has been a petroleum concessionaire, he was or has been diligent in the prosecution of his obligations as such, (2) the concessionaire is found by the Secretary to have complied with all his obligations under the terms of his concession contract, the provisions of this Act and the regulations, and other applicable laws and regulations, and (3) the transferee binds himself to assume all the rights and obligations of the concessionaire: Provided, That in case retention of unreasonable royalty interest by the assignor, directly or indirectly, is involved in said transfer or assignment, the same shall be examined to protect public interest: And provided, further, That the proposed transferee or assignee shall not hold a total area under exploration and/or exploitation concessions, including that being transferred to him, of more than the maximum areas allowed under this Act. (Amendments to R. A. No. 387 (Petroleum Act of 1949), Republic Act No. 3098, [June 17, 1961])

ARTICLE 113. Partial invalidity. — If any clause, sentence, provision or article of this Act should for any reason be held to be invalid or unconstitutional, it shall not affect in anywise the remaining parts of this Act and such remaining parts shall remain in full force and effect.

ARTICLE 114. Repeal of laws, rules and regulations. — All acts, laws, rules and regulations inconsistent with any of the provisions of this Act are hereby repealed.

ARTICLE 115. Effective date. —This Act shall take effect upon its approval.

Approved: June 18, 1949

May 27, 2010

AN ACT STRENGTHENING THE PHILIPPINE DISASTER RISK REDUCTION AND MANAGEMENT SYSTEM, PROVIDING FOR THE NATIONAL DISASTER RISK REDUCTION AND MANAGEMENT FRAMEWORK AND INSTITUTIONALIZING THE NATIONAL DISASTER RISK REDUCTION AND MANAGEMENT PLAN, APPROPRIATING FUNDS THEREFOR AND FOR OTHER PURPOSES.

• See IRR here

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Title. - This Act shall be known as the "Philippine Disaster Risk Reduction and Management Act of 2010".

Section 2. Declaration of Policy. - It shall be the policy of the State to:

(a) Uphold the people's constitutional rights to life and property by addressing the root causes of vulnerabilities to disasters, strengthening the country's institutional capacity for disaster risk reduction and management and building the resilience of local communities to disasters including climate change impacts;

(b) Adhere to and adopt the universal norms, principles and standards of humanitarian assistance and the global effort on risk reduction as concrete expression of the country's commitment to overcome human sufferings due to recurring disasters;

(c) Incorporate internationally accepted principles of disaster risk management in the creation and implementation of national, regional and local sustainable development and poverty reduction strategies, policies, plans and budgets;

(d) Adopt a disaster risk reduction and management approach that is holistic, comprehensive, integrated, and proactive in lessening the socioeconomic and environmental impacts of disasters including climate change, and promote the involvement and participation of all sectors and all stakeholders concerned, at all levels, especially the local community;

(e) Develop, promote, and implement a comprehensive National Disaster Risk Reduction and Management Plan (NDRRMP) that aims to strengthen the capacity of the national government and the local government units (LGUs), together with partner stakeholders, to build the disaster resilience of communities, and' to institutionalize arrangements and measures for reducing disaster risks, including projected climate risks, and enhancing disaster preparedness and response capabilities at all levels;

(f) Adopt and implement a coherent, comprehensive, integrated, efficient and responsive disaster risk reduction program incorporated in the development plan at various levels of government adhering to the principles of good governance such as transparency and accountability within the context of poverty alleviation and environmental protection;

(g) Mainstream disaster risk reduction and climate change in development processes such as policy formulation, socioeconomic development planning, budgeting, and governance, particularly in the areas of environment, agriculture, water, energy, health, education, poverty reduction, land-use and urban planning, and public infrastructure and housing, among others;

(h) Institutionalize the policies, structures, coordination mechanisms and programs with continuing budget appropriation on disaster risk reduction from national down to local levels towards building a disaster-resilient nation and communities;

(i) Mainstream disaster risk reduction into the peace process and conflict resolution approaches in order to minimize loss of lives and damage to property, and ensure that communities in conflict zones can immediately go back to their normal lives during periods of intermittent conflicts;

(j) Ensure that disaster risk reduction and climate change measures are gender responsive, sensitive to indigenous know ledge systems, and respectful of human rights;

(k) Recognize the local risk patterns across the country and strengthen the capacity of LGUs for disaster risk reduction and management through decentralized powers, responsibilities, and resources at the regional and local levels;

(l) Recognize and strengthen the capacities of LGUs and communities in mitigating and preparing for, responding to, and recovering from the impact of disasters;

(m) Engage the participation of civil society organizations (CSOs), the private sector and volunteers in the government's disaster risk reduction programs towards complementation of resources and effective delivery of services to the Citizenry;

(n) Develop and strengthen the capacities of vulnerable and marginalized groups to mitigate, prepare for, respond to, and recover from the effects of disasters;

(o) Enhance and implement a program where humanitarian aid workers, communities, health professionals, government aid agencies, donors, and the media are educated and trained on how they can actively support breastfeeding before and during a disaster and/or an emergency; and

(p) Provide maximum care, assistance and services to individuals and families affected by disaster, implement emergency rehabilitation projects to lessen the impact of disaster, and facilitate resumption of normal social and economic activities.

Section 3. Definition of Terms. - For purposes of this Act, the following shall refer to:

(a) "Adaptation" - the adjustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates harm or exploits beneficial opportunities.

(b) "Capacity" - a combination of all strengths and resources available within a community, society or organization that can reduce the level of risk, or effects of a disaster. Capacity may include infrastructure and physical means, institutions, societal coping abilities, as well as human knowledge, skills and collective attributes such as social relationships, leadership and management. Capacity may also be described as capability.

(c) "Civil Society Organizations" Or "CSOs" - non-state actors whose aims are neither to generate profits nor to seek governing power. CSOs unite people to advance shared goals and interests. They have a presence in public life, expressing the interests and values of their members or others, and are based on ethical, cultural, scientific, religious or philanthropic considerations. CSOs include nongovernment organizations (NGOs), professional associations, foundations, independent research institutes, community-based organizations (CBOs), faith-based organizations, people's organizations, social movements, and labor unions.

(d) "Climate Change" - a change in climate that can' be identified by changes in the mean and/or variability of its properties and that persists for an extended period typically decades or longer, whether due to natural variability or as a result of human activity.

(e) "Community-Based Disaster Risk Reduction and Management" or "CBDRRM" - a process of disaster risk reduction and management in which at risk communities are actively engaged in the identification, analysis, treatment, monitoring and evaluation of disaster risks in order to reduce their vulnerabilities and enhance their capacities, and where the people are at the heart of decision-making and implementation of disaster risk reduction and management activities.

(f) "Complex Emergency" - a form of human-induced emergency in which the cause of the emergency as well as the assistance to the afflicted IS complicated by intense level of political considerations.

(g) "Contingency Planning" - a management process that analyzes specific potential events or emerging situations that might threaten society or the environment and establishes arrangements in advance to enable timely, effective and appropriate responses to such events and situations.

(h) "Disaster" - a serious disruption of the functioning of a community or a society involving widespread human, material, economic or environmental losses and impacts, which exceeds the ability of the affected community or society to cope using its own resources. Disasters are often described as a result of the combination of: the exposure to a hazard; the conditions of vulnerability that are present; and insufficient capacity or measures to reduce or cope with the potential negative consequences, Disaster impacts may include loss of life, injury, disease and other negative effects on human, physical, mental and social well-being, together with damage to property, destruction of assets, loss of services, Social and economic disruption and environmental degradation.1avvphi1

(i) "Disaster Mitigation" - the lessening or limitation of the adverse impacts of hazards and related disasters. Mitigation measures encompass engineering techniques and hazard-resistant construction as well as improved environmental policies and public awareness.

(j) "Disaster Preparedness" - the knowledge and capacities developed by governments, professional response and recovery organizations, communities and individuals to effectively anticipate, respond to, and recover from, the Impacts of likely, imminent or current hazard events or conditions. Preparedness action is carried out within the context of disaster risk reduction and management and aims to build the capacities needed to efficiently manage all types of emergencies and achieve orderly transitions from response to sustained recovery. Preparedness is based on a sound analysis of disaster risk and good linkages with early warning systems, and includes such activities as contingency planning, stockpiling of equipment and supplies, the development of arrangements for coordination, evacuation and public information, and associated training and field exercises. These must be supported by formal institutional, legal and budgetary capacities.

(k) "Disaster Prevention" - the outright avoidance of adverse impacts of hazards and related disasters. It expresses the concept and intention to completely avoid potential adverse impacts through action taken in advance such as construction of dams or embankments that eliminate flood risks, land-use regulations that do not permit any settlement in high-risk zones, and seismic engineering designs that ensure the survival and function of a critical building in any likely earthquake.

(l) "Disaster Response" - the provision of emergency services and public assistance during or immediately after a disaster in order to save lives, reduce health impacts, ensure public safety and meet the basic subsistence needs of the people affected. Disaster response is predominantly focused on immediate and short-term needs and is sometimes called "disaster relief".

(m) "Disaster Risk" - the potential disaster losses in lives, health status, livelihood, assets and services, which could occur to a particular community or a Society over some specified future time period.

(n) "Disaster Risk Reduction" - the concept and practice of reducing disaster risks through systematic efforts to analyze and manage the causal factors of disasters, including through reduced exposures to hazards, lessened vulnerability of people and property, wise management of land and the environment, and improved preparedness for adverse events.

(o) "Disaster Risk Reduction and Management" - the systematic process of using administrative directives, organizations, and operational skills and capacities to implement strategies, policies and improved coping capacities in order to lessen the adverse impacts of hazards and the possibility of disaster. Prospective disaster risk reduction and management refers to risk reduction and management activities that address and seek to avoid the development of new or increased disaster risks, especially if risk reduction policies are not put m place.

(p) "Disaster Risk Reduction and Management Information System" - a specialized database which contains, among others, information on disasters and their human material, economic and environmental impact, risk assessment and mapping and vulnerable groups.

(q) "Early Warning System" - the set of capacities needed to generate and disseminate timely and meaningful warning information to enable individuals, communities and organizations threatened by a hazard to prepare and to act appropriately and in sufficient time to reduce the possibility of harm or loss. A people-centered early warning system necessarily comprises four (4) key elements: knowledge of the risks; monitoring, analysis and forecasting of the hazards; communication or dissemination of alerts and warnings; and local capabilities to respond to the warnings received. The expression "end-to-end warning system" is also used to emphasize that warning systems need to span all steps from hazard detection to community response.

(r) "Emergency" - unforeseen or sudden occurrence, especially danger, demanding immediate action.

(s) "Emergency Management" - the organization and management of resources and responsibilities for addressing all aspects of emergencies, in particular preparedness, response and initial recovery steps.

(t) "Exposure" - the degree to which the elements at risk are likely to experience hazard events of different magnitudes.

(u) "Geographic Information System" - a database which contains, among others, geo-hazard assessments, information on climate change, and climate risk reduction and management.

(v) "Hazard" - a dangerous phenomenon, substance, human activity or condition that may cause loss of life, injury or other health impacts, property damage, loss of livelihood and services, social and economic disruption, or environmental damage.

(w) "Land-Use Planning" - the process undertaken by public authorities to identify, evaluate and decide on different options for the use of land, including consideration of long-term economic, social and environmental objectives and the implications for different communities and interest groups, and the subsequent formulation and promulgation of plans that describe the permitted or acceptable uses.

(x) "Mitigation" - structural and non-structural measures undertaken to limit the adverse impact of natural hazards, environmental degradation, and technological hazards and to ensure the ability of at-risk communities to address vulnerabilities aimed at minimizing the impact of disasters. Such measures include, but are not limited to, hazard-resistant construction and engineering works, the formulation and implementation of plans, programs, projects and activities, awareness raising, knowledge management, policies on land-use and resource management, as well as the enforcement of comprehensive land-use planning, building and safety standards, and legislation.

(y) "National Disaster Risk Reduction and Management Framework" or "NDRRMF" - provides for comprehensive, all hazards, multi-sectoral, inter-agency and community-based approach to disaster risk reduction and management.

(z) "National Disaster Risk Reduction and Management Plan" or "NDRRMP" - the document to be formulated and implemented by the Office of Civil Defense (OCD) that sets out goals and specific objectives for reducing disaster risks together with related actions to accomplish these objectives.

The NDRRMP shall provide for the identification of hazards, vulnerabilities and risks to 'be managed at the national level; disaster risk reduction and management approaches and strategies to be applied m managing said hazards and risks; agency roles, responsibilities and lines of authority at all government levels; and vertical and horizontal coordination of disaster risk reduction and management in the pre-disaster and post-disaster phases. It shall be in conformity with the NDRRMF.

(aa) "Post-Disaster Recovery" - the restoration and improvement where appropriate, of facilities, livelihood and living conditions. of disaster-affected communities, including efforts to reduce disaster risk factors, in accordance with the principles of "build back better".

(bb) "Preparedness" - pre-disaster actions and measures being undertaken within the context of disaster risk reduction and management and are based on sound risk analysis as well as pre-disaster activities to avert or minimize loss of life and property such as, but not limited to, community organizing, training, planning, equipping, stockpiling, hazard mapping, insuring of assets, and public information and education initiatives. This also includes the development/enhancement of an overall preparedness strategy, policy, institutional structure, warning and forecasting capabilities, and plans that define measures geared to help at-risk communities safeguard their lives and assets by being alert to hazards and taking appropriate action in the face of an Imminent threat or an actual disaster.

(cc) "Private Sector" - the key actor in the realm of the economy where the central social concern and process are the mutually beneficial production and distribution of goods and services to meet the physical needs of human beings. The private sector comprises private corporations, households and nonprofit institutions serving households.

(dd) "Public Sector Employees" - all persons in the civil service.

(ee) "Rehabilitation" - measures that ensure the ability of affected communities/areas to restore their normal level of functioning by rebuilding livelihood and damaged infrastructures and increasing the communities' organizational capacity.

(ff) "Resilience" - the ability of a system, community or society exposed to hazards to resist, absorb, accommodate and recover from the effects of a hazard in a timely and efficient manner, including through the preservation and restoration of its essential basic structures and functions.

(gg) "Response" - any concerted effort by two (2) or more agencies, public or private, to provide assistance or intervention during or immediately after a disaster to meet the life preservation and basic subsistence needs of those people affected and in the restoration of essential public activities and facilities.

(hh) "Risk" - the combination of the probability of an event and its negative consequences.

(ii) "Risk Assessment" - a methodology to determine the nature and extent of risk by analyzing potential hazards and evaluating existing conditions of vulnerability that together could potentially harm exposed people, property, services, livelihood and the environment on which they depend. Risk assessments with associated risk mapping include: a review of the technical characteristics of hazards such as their location, intensity, frequency and probability; the analysis of exposure and vulnerability including the physical, social, health, economic and environmental dimensions; and the evaluation of the effectiveness of prevailing and alternative coping capacities in respect to likely risk scenarios.

(jj) "Risk Management" - the systematic approach and practice of managing uncertainty to minimize potential harm and loss. It comprises risk assessment and analysis, and the implementation of strategies and specific actions to control, reduce and transfer risks. It is widely practiced by organizations to minimize risk in investment decisions and to address operational risks such as those of business disruption, production failure, environmental damage, social impacts and damage from fire and natural hazards.

(kk) "Risk Transfer" - the process of formally or informally shifting the financial consequences of particular risks from one party to another whereby a household, community, enterprise or state authority will obtain resources from the other party after a disaster occurs, in exchange for ongoing or compensatory social or financial benefits provided to that other party.

(ll) "State of Calamity" - a condition involving mass casualty and/or major damages to property, disruption of means of livelihoods, roads and normal way of life of people in the affected areas as a result of the occurrence of natural or human-induced hazard.

(mm) "Sustainable Development" - development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two (2) key concepts: (1) the concept of "needs", in particular, the essential needs of the world's poor, to which overriding priority should be given; and (2) the idea of limitations imposed by the state of technology and social organizations on the environment's ability to meet present and future needs. It is the harmonious integration of a sound and viable economy, responsible governance, social cohesion and harmony, and ecological integrity to ensure that human development now and through future generations is a life-enhancing process.

(nn) "Vulnerability" - the characteristics and circumstances of a community, system or asset that make it susceptible to the damaging effects of a hazard. Vulnerability may arise from various physical, social, economic, and environmental factors such as poor design and construction of buildings, inadequate protection of assets, lack of public information and awareness, limited official recognition of risks and preparedness measures, and disregard for wise environmental management.

(oo) "Vulnerable and Marginalized Groups" - those that face higher exposure to disaster risk and poverty including, but not limited to, women, children, elderly, differently-abled people, and ethnic minorities.

Section 4. Scope. - This Act provides for the development of policies and plans and the implementation of actions and measures pertaining to all aspects of disaster risk reduction and management, including good governance, risk assessment and early warning, knowledge building and awareness raising, reducing underlying risk factors, and preparedness for effective response and early recovery.

Section 5. National Disaster Risk Reduction and Management Council. - The present National Disaster Coordinating Council or NDCC shall henceforth be known as the National Disaster Risk Reduction and Management Council, hereinafter referred to as the NDRRMC or the National Council.

The National Council shall be headed by the Secretary of the Department of National Defense (DND) as Chairperson with the Secretary of the Department of the Interior and Local Government (DILG) as Vice Chairperson for Disaster Preparedness, the Secretary of the Department of Social

Welfare and Development (DSWD) as Vice Chairperson for Disaster Response, the Secretary of the Department of Science and Technology (DOST) as Vice Chairperson for Disaster Prevention and Mitigation, and the Director-General of the National Economic and Development Authority (NEDA) as Vice Chairperson for Disaster Rehabilitation and Recovery.

The National Council's members shall be the following:

(a) Secretary of the Department of Health (DOH);

(b) Secretary of the Department of Environment and Natural Resources (DENR);

(c) Secretary of the Department of Agriculture (DA);

(d) Secretary of the Department of Education (DepED);

(e) Secretary of the Department of Energy (DOE);

(f) Secretary of the Department of Finance (DOF);

(g) Secretary of the Department of Trade and Industry (DT!);

(h) Secretary of the Department of Transportation and Communications (DOTC);

(i) Secretary of the Department of Budget and Management (DBM);

(j) Secretary of the Department of Public Works and Highways (DPWH);

(k) Secretary of the Department of Foreign Affairs (DFA);

(l) Secretary of the Department of Justice (DOJ);

(m) Secretary of the Department of Labor and Employment (DOLE);

(n) Secretary of the Department of Tourism (DOT);

(o) The Executive Secretary;

(p)Secretary of the Office of the Presidential Adviser on the Peace Process (OPAPP);

(q) Chairman, Commission on Higher Education (CHED);

(r) Chief of Staff, Armed Forces of the Philippines (AFP);

(s) Chief, Philippine National Police (PNP);

(t) The Press Secretary;

(u) Secretary General of the Philippine National Red Cross (PNRC);

(v) Commissioner of the National Anti-Poverty Commission-Victims of Disasters and Calamities Sector (NAPCVDC);

(w) Chairperson, National Commission on the Role of Filipino Women;

(x) Chairperson, Housing and Urban Development Coordinating Council (HUDCC);

(y) Executive Director of the Climate Change Office of the Climate Change Commission;

(z) President, Government Service Insurance System (GSIS);

(aa) President, Social Security System (SSS);

(bb) President, Philippine Health Insurance Corporation (PhilHealth);

(cc) President of the Union of Local Authorities of the Philippines (ULAP);

(dd) President of the League of Provinces of the Philippines (LPP);

(ee) President of the League of Cities of the Philippines (LCP);

(ff) President of the League of Municipalities of the Philippines (LMP);

(gg) President of the Liga ng Mga Barangay (LMB);

(hh) Four (4) representatives from the CSOs;

(ii) One (1) representative from the private sector; and

(jj) Administrator of the OCD.

The representatives from the CSOs and the private sector shall be selected from among their respective ranks based on the criteria and mechanisms to be set for this purpose by the National Council.

Section 6. Powers and Functions of the NDRRMC. - The National Council, being empowered with policy-making, coordination, integration, supervision, monitoring and evaluation functions, shall have the following responsibilities:

(a) Develop a NDRRMF which shall provide for a comprehensive, all-hazards, multi-sectoral, inter-agency and community-based approach to disaster risk reduction and management. The Framework shall serve as the principal guide to disaster risk reduction and management efforts in the country and shall be reviewed on a five(5)-year interval, or as may be deemed necessary, in order to ensure its relevance to the times;

(b) Ensure that the NDRRMP is consistent with the NDRRMF;

(c) Advise the President on the status of disaster preparedness, prevention, mitigation, response and rehabilitation operations being undertaken by the government, CSOs, private sector, and volunteers; recommend to the President the declaration of a state of calamity in areas extensively damaged; and submit proposals to restore normalcy in the affected areas, to include calamity fund allocation;

(d) Ensure a multi-stakeholder participation in the development, updating, and sharing of a Disaster Risk Reduction and Management Information System and Geographic Information System-based national risk map as policy, planning and decision-making tools;

(e) Establish a national early warning and emergency alert system to provide accurate and timely advice to national or local emergency response organizations and to the general public through diverse mass media to include digital and analog broadcast, cable, satellite television and radio, wireless communications, and landline communications;

(f) Develop appropriate risk transfer mechanisms that shall guarantee social and economic protection and increase resiliency in the face of disaster;

(g) Monitor the development and enforcement by agencies and organizations of the various laws, guidelines, codes or technical standards required by this Act;

(h) Manage and mobilize resources for disaster risk reduction and management including the National Disaster Risk Reduction and Management Fund;

(i) Monitor and provide the necessary guidelines and procedures. on the Local Disaster Risk Reduction and Management Fund (LDRRMF) releases as well as utilization, accounting and auditing thereof;

(j) Develop assessment tools on the existing and potential hazards and risks brought about by climate change to vulnerable areas and ecosystems in coordination with the Climate Change Commission;

(k) Develop vertical and horizontal coordination mechanisms for a more coherent implementation of disaster risk reduction and management policies and programs by sectoral agencies and LGUs;

(l) Formulate a national institutional capability building program for disaster risk reduction and management to address the specific' weaknesses of various government agencies and LGUs, based on the results of a biennial baseline assessment and studies;

(m) Formulate, harmonize, and translate into policies a national agenda for research and technology development on disaster risk reduction and management;

(n) In coordination with the Climate Change Commission, formulate and implement a framework for climate change adaptation and disaster risk reduction and management from which all policies, programs, and projects shall be based;

(o) Constitute a technical management group composed of representatives of the abovementioned departments, offices, and organizations, that shall coordinate and meet as often as necessary to effectively manage and sustain national efforts on disaster risk reduction and management;

(p) Task the OCD to conduct periodic assessment and performance monitoring of the member-agencies of the NDRRMC, and the Regional Disaster Risk Reduction and Management Councils (RDRRMCs), as defined in the NDRRMP; and

(q) Coordinate or oversee the Implementation of the country's obligations with disaster management treaties to which it IS a party and see to It that the country's disaster management treaty obligations be incorporated in its disaster risk reduction and management frameworks, policies, plans, programs and projects.

Section 7. Authority of the NDRRMC Chairperson. - The Chairperson of the NDRRMC may call upon other instrumentalities or entities of the government and nongovernment and civic organizations for assistance In terms of the use of their facilities and resources for the protection and preservation of life and properties in the whole range of disaster risk reduction and management. This authority includes the power to call on the reserve force as defined in Republic Act No. 7077 to assist in relief and rescue during disasters or calamities.

Section 8. The Office of Civil Defense. - The Office of Civil Defense (OCD) shall have the primary mission of administering a comprehensive national civil defense and disaster risk reduction and management program by providing leadership in the continuous development of strategic and systematic approaches as well as measures to reduce the vulnerabilities and risks to hazards and manage the consequences of disasters.

The Administrator of the OCD shall also serve as Executive Director of the National Council and, as such, shall have the same duties and privileges of a department undersecretary. All appointees shall be universally acknowledged experts in the field of disaster preparedness and management and of proven honesty and integrity. The National Council shall utilize the services and facilities of the OCD as the secretariat of the National Council.

Section 9. Powers and Functions of the OCD. - The OCD shall have the following powers and functions:

(a) Advise the National Council on matters relating to disaster risk reduction and management consistent with the policies and scope as defined in this Act;

(b) Formulate and implement the NDRRMP and ensure that the physical framework, social, economic and environmental plans of communities, cities, municipalities and provinces are consistent with such plan. The National Council shall approve the NDRRMP;

(c) Identify, assess and prioritize hazards and risks in consultation with key stakeholders;

(d) Develop and ensure the implementation of national standards in carrying out disaster risk reduction programs including preparedness, mitigation, prevention, response and rehabilitation works, from data collection and analysis, planning, implementation, monitoring and evaluation;

(e) Review and evaluate the Local Disaster risk Reduction and Management Plans (LDRRMPs) to facilitate the integration of disaster risk reduction measures into the local Comprehensive Development Plan (CDP) and Comprehensive Land-Use Plan (CL UP);

(f) Ensure that the LG U s, through the Local Disaster Risk Reduction and Management Offices (LDRRMOs) are properly informed and adhere to the national standards and programs;

(g) Formulate standard operating procedures for the deployment of rapid assessment teams, information sharing among different government agencies, and coordination before and after disasters at all levels;

(h) Establish standard operating procedures on the communication system among provincial, city, municipal, and barangay disaster risk reduction and management councils, for purposes of warning and alerting them and for gathering information on disaster areas before, during and after disasters;

(i) Establish Disaster Risk Reduction and Management Training Institutes in such suitable location as may be deemed appropriate to train public and private individuals, both local and national, in such subject as disaster risk reduction and management among others. The Institute shall consolidate and prepare training materials and publications of disaster risk reduction and management books and manuals to assist disaster risk reduction and management workers in the planning and implementation of this program and projects. The Institute shall conduct research programs to upgrade know ledge and skills and document best practices on disaster risk reduction and management. The Institute is also mandated to conduct periodic awareness and education programs to accommodate new elective officials and members of the LDRRMCs;

(j) Ensure that all disaster risk reduction programs, projects and activities requiring regional and international support shall be in accordance with duly established national policies and aligned with international agreements;

(k) Ensure that government agencies and LGUs give top priority and take adequate and appropriate measures in disaster risk reduction and management;

(l) Create an enabling environment for substantial and sustainable participation of CSOs, private groups, volunteers and communities, and recognize their contributions in the government's disaster risk reduction efforts;

(m) Conduct early recovery and post-disaster needs assessment institutionalizing gender analysis as part of it;

(n) Establish an operating facility to be known as the National Disaster Risk Reduction and Management Operations Center (NDRRMOC) that shall be operated and staffed on a twenty-four (24) hour basis;

(o) Prepare the criteria and procedure for the enlistment of accredited community disaster volunteers (ACDVs). It shall include a manual of operations for the volunteers which shall be developed by the On consultation with various stakeholders;

(p) Provide advice and technical assistance and assist in mobilizing necessary resources to increase the overall capacity of LGUs, specifically the low income and in high-risk areas;

(q) Create the necessary offices to perform its mandate as provided under this Act; and

(r) Perform such other functions as may be necessary for effective operations and implementation of this Act.

Section 10. Disaster Risk Reduction and Management Organization at the Regional Level. - The current Regional Disaster Coordinating Councils shall henceforth be known as the Regional Disaster Risk Reduction and Management Councils (RDRRMCs) which shall coordinate, integrate, supervise, and evaluate the activities of the LDRRMCs. The RDRRMC shall be responsible in ensuring disaster sensitive regional development plans, and in case of emergencies shall convene the different regional line agencies and concerned institutions and authorities.

The RDRRMCs shall establish an operating facility to be known as the Regional Disaster Risk Reduction and Management Operations Center (RDRRMOC) whenever necessary.

The civil defense officers of the OCD who are or may be designated as Regional Directors of the OCD shall serve as chairpersons of the RDRRMCs. Its Vice Chairpersons shall be the Regional Directors of the DSWD, the DILG, the DOST, and the NEDA. In the case of the Autonomous Region in Muslim Mindanao (ARMM), the Regional Governor shall be the RDRRMC Chairperson. The existing regional offices of the OCD shall serve as secretariat of the RDRRMCs. The RDRRMCs shall be composed of the executives of regional offices and field stations at the regional level of the government agencies.

Section 11. Organization at the Local Government Level. - The existing Provincial, City, and Municipal Disaster Coordinating Councils shall henceforth be known as the Provincial, City, and Municipal Disaster Risk Reduction and Management Councils. The Barangay Disaster Coordinating Councils shall cease to exist and its powers and functions shall henceforth be assumed by the existing Barangay Development Councils (BDCs) which shall serve as the LDRRMCs in every barangay.

(a) Composition: The LDRRMC shall be composed of, but not limited to, the following:

(1) The Local Chief Executives, Chairperson;

(2) The Local Planning and Development Officer, member;

(3) The Head of the LDRRMO, member;

(4) The Head of the Local Social Welfare and Development Office, member;

(5) The Head of the Local Health Office, member;

(6) The Head of the Local Agriculture Office, member;

(7) The Head of the Gender and Development Office, member;

(8) The Head of the Local Engineering Office, member;

(9) The Head of the Local Veterinary Office, member;

(10) The Head of the Local Budget Office, member;

(11) The Division Head/Superintendent of Schools of the DepED, member;

(12) The highest-ranking officer of the Armed Forces of the Philippines (AFP) assigned in the area, member;

(13) The Provincial Director/City/Municipal Chief of the Philippine National Police (PNP), member;

(14) The Provincial Director/City/ Municipal Fire Marshall of the Bureau of Fire Protection (BFP), member;

(15) The President of the Association of Barangay Captains (ABC), member;

(16) The Philippine National Red Cross (PNRC), member;

(17) Four (4) accredited CSOs, members; and

(18) One (1) private sector representative, member.

(b) The LDRRMCs shall have the following functions:

(1) Approve, monitor and evaluate the implementation of the LDRRMPs and regularly review and test the plan consistent with other national and local planning programs;

(2) Ensure the integration of disaster risk reduction and climate change adaptation into local development plans, programs and budgets as a strategy in sustainable development and poverty reduction;

(3) Recommend the implementation of forced or preemptive evacuation of local residents, if necessary; and

(4) Convene the local council once every three (3) months or as necessary.

Section 12. Local Disaster Risk Reduction and Management Office (LDRRMO). - (a) There shall be established an LDRRMO in every province, city and municipality, and a Barangay Disaster Risk Reduction and Management Committee (BDRRMC) in every · barangay which shall be responsible for setting the direction, development, implementation and coordination of disaster risk management programs within their territorial jurisdiction.

(b) The LDRRMO shall be under the office of the governor, city or municipal mayor, and the punong barangay in case of the BDRRMC. The LDRRMOs shall be initially organized and composed of a DRRMO to be assisted by three (3) staff responsible for: (1) administration and training; (2) research and planning; and (3) operations and warning. The LDRRMOs and the BDRRMCs shall organize, train and directly supervise the local emergency response teams and the ACDVs.

(c) The provincial, city and municipal DRRMOs or BDRRMCs shall perform the following functions with impartiality given the emerging challenges brought by disasters of our times:

(1) Design, program, and coordinate disaster risk reduction and management activities consistent with the National Council's standards and guidelines;

(2) Facilitate and support risk assessments and contingency planning activities at the local level;

(3) Consolidate local disaster risk information which includes natural hazards, vulnerabilities, and climate change risks, and maintain a local risk map;

(4) Organize and conduct training, orientation, and knowledge management activities on disaster risk reduction and management at the local level;

(5) Operate a multi-hazard early warning system, linked to disaster risk reduction to provide accurate and timely advice to national or local emergency response organizations and to the general public, through diverse mass media, particularly radio, landline communications, and technologies for communication within rural communities;

(6) Formulate and implement a comprehensive and - integrated LDRRMP in accordance with the national, regional and provincial framework, and policies on disaster risk reduction in close coordination with the local development councils (LDCs);

(7) Prepare and submit to the local sanggunian through the LDRRMC and the LDC the annual LDRRMO Plan and budget, the proposed programming of the LDRRMF, other dedicated disaster risk reduction and management resources, and other regular funding source/s and budgetary support of the LDRRMO/BDRRMC;

(8) Conduct continuous disaster monitoring and mobilize instrumentalities and entities of the LGUs, CSOs, private groups and organized volunteers, to utilize their facilities and resources for the protection and preservation of life and properties during emergencies in accordance with existing policies and procedures;

(9) Identify, assess and manage the hazards vulnerabilities and risks that may occur in their locality;

(10) Disseminate information and raise public awareness about those hazards. vulnerabilities and risks, their nature, effects, early warning signs and counter-measures;

(11) Identify and implement cost-effective risk reduction measures/strategies;

(12) Maintain a database of human resource, equipment, directories, and location of critical infrastructures and their capacities such as hospitals and evacuation centers;

(13) Develop, strengthen and operationalize mechanisms for partnership or networking with the private sector, CSOs, and volunteer groups;

(14) Take all necessary steps on a continuing basis to maintain, provide, or arrange the provision of, or to otherwise make available, suitably-trained and competent personnel for effective civil defense and disaster risk reduction and management in its area;

(15) Organize, train, equip and supervise the local emergency response teams and the ACDV s, ensuring that humanitarian aid workers are equipped with basic skills to assist mothers to breastfeed;

(16) Respond to and manage the adverse effects of emergencies and carry out recovery activities in the affected area, ensuring that there is an efficient mechanism for immediate delivery of food, shelter and medical supplies for women and children, endeavor to create a special place where internally-displaced mothers can find help with breastfeeding, feed and care for their babies and give support to each other;

(17) Within its area, promote and raise public awareness of and compliance with this Act and legislative provisions relevant to the purpose of this Act;

(18) Serve as the secretariat and executive arm of the LDRRMC;

(19) Coordinate other disaster risk reduction and management activities;

(20) Establish linkage/network with other LGUs for disaster risk reduction and emergency response purposes;

(21) Recommend through the LDRRMC the enactment of local ordinances consistent with the requirements of this Act;

(22) Implement policies, approved plans and programs of the LDRRMC consistent with the policies and guidelines laid down in this Act;

(23) Establish a Provincial/City/Municipal/Barangay Disaster Risk Reduction and Management Operations Center;

(24) Prepare and submit, through the LDRRMC and the LDC, the report on the utilization of the LDRRMF and other dedicated disaster risk reduction and management resources to the local Commission on Audit (COA), copy furnished the regional director of the OCD and the Local Government Operations Officer of the DILG; and

(25) Act on other matters that may be authorized by the LDRRMC.

(d) The BDRRMC shall be a regular committee of the existing BDC and shall be subject thereto. The punong barangay shall facilitate and ensure the participation of at least two (2) CSO representatives from existing and active community-based people's organizations representing the most vulnerable and marginalized groups in the barangay.

Section 13. Accreditation, Mobilization, and Protection of Disaster Volunteers and National Service Reserve Corps, CSOs and the Private Sector. - The government agencies, CSOs, private sector and LGUs may mobilize individuals or organized volunteers to augment their respective personnel complement and logistical requirements in the delivery of disaster risk reduction programs and activities. The agencies, CSOs, private sector, and LGUs concerned shall take full responsibility for the enhancement, welfare and protection of volunteers, and shall submit the list of volunteers to the OCD, through the LDRRMOs, for accreditation and inclusion in the database of community disaster volunteers.

A national roster of ACDVs, National Service Reserve Corps, CSOs and the private sector shall be maintained by the OCD through the LDRRMOs. Accreditation shall be done at the municipal or city level.

Mobilization of volunteers shall be in accordance with the guidelines to be formulated by the NDRRMC consistent with the provisions of this Act. Any volunteer who incurs death or injury while engaged in any of the activities defined under this Act shall be entitled to compensatory benefits and individual personnel accident insurance as may be defined under the guidelines.

Section 14. Integration of Disaster Risk Reduction Education into the School Curricula and Sangguniang Kabataan (SK) Program and Mandatory Training for the Public Sector Employees. - The DepED, the CHED, the Technical Education and Skills Development Authority (TESDA), in coordination with the OCD, the National Youth Commission (NYC), the DOST, the DENR, the DILG-BFP, the DOH, the DSWD and other relevant agencies, shall integrate disaster risk reduction and management education in the school curricula of secondary and tertiary level of education, including the National Service Training Program (NSTP), whether private or public, including formal and nonformal, technical-vocational, indigenous learning, and out-of-school youth courses and programs.

The NDRRMC, the RDRRMCs, the LDRRMCs, the LDRRMOs, the BDRRMCs and the SK councils shall encourage community, specifically the youth, participation in disaster risk reduction and management activities, such as organizing quick response groups, particularly in identified disaster-prone areas, as well as the inclusion of disaster risk reduction and management programs as part of the SK programs and projects.

The public sector employees shall be trained in emergency response and preparedness. The training is mandatory for such employees to comply with the provisions of this Act.

Section 15. Coordination During Emergencies. - The LDRRMCs shall take the lead in preparing for, responding to, and recovering from the effects of any disaster based on the following criteria:

(a) The BDC, if a barangay is affected;

(b) The city/municipal DRRMCs, If two (2) or more barangays are affected;

(c) The provincial DRRMC, if two (2) or more cities/municipalities are affected;

(d) The regional DRRMC, if two (2) or more provinces are affected; and

(e) The NDRRMC, if two (2) or more regions are affected.

The NDRRMC and intermediary LDRRMCs shall always act as support to LGUs which have the primary responsibility as first disaster responders. Private sector and civil society groups shall work in accordance with the coordination mechanism and policies set by the NDRRMC and concerned LDRRMCs.

Section 16. Declaration of State of Calamity. - The National Council shall recommend to the President of the Philippines the declaration of a cluster of barangays, municipalities, cities, provinces, and regions under a state of calamity, and the lifting thereof, based on the criteria set by the National Council. The President's declaration may warrant international humanitarian assistance as deemed necessary.

The declaration and lifting of the state of calamity may also be issued by the local sanggunian, upon the recommendation of the LDRRMC, based on the results of the damage assessment and needs analysis.

Section 17. Remedial Measures. - The declaration of a state of calamity shall make mandatory the Immediate undertaking of the following remedial measures by the member-agencies concerned as defined in this Act:

(a) Imposition of price ceiling on basic necessities and prime commodities by the President upon the recommendation of the implementing agency as provided for under Republic Act No. 7581, otherwise known as the "Price Act", or the National Price Coordinating Council;

(b) Monitoring, prevention and control by the Local Price Coordination Council of overpricing/profiteering and hoarding of prime commodities, medicines and petroleum products;

(c) Programming/reprogramming of funds for the repair and safety upgrading of public infrastructures and facilities; and

(d) Granting of no-interest loans by government financing or lending institutions to the most affected section of the population through their cooperatives or people's organizations.

Section 18. Mechanism for International Humanitarian Assistance. - (a) The importation and donation of food, clothing, medicine and equipment for relief and recovery and other disaster management and recovery-related supplies is hereby authorized in accordance with Section 105 of the Tariff and Customs Code of the Philippines, as amended, and the prevailing provisions of the General Appropriations Act covering national internal revenue taxes and import duties of national and local government agencies; and

(b) Importations and donations under this section shall be considered as importation by and/or donation to the NDRRMC, subject to the approval of the Office of the President.

Section 19. Prohibited Acts. - Any person, group or corporation who commits any of the following prohibited acts shall be held liable and be subjected to the penalties as prescribed in Section 20 of this Act:

(a) Dereliction of duties which leads to destruction, loss of lives, critical damage of facilities and misuse of funds;

(b) Preventing the entry and distribution of relief goods in disaster-stricken areas, including appropriate technology, tools, equipment, accessories, disaster teams/experts;

(c) Buying, for consumption or resale, from disaster relief agencies any relief goods, equipment or other and commodities which are intended for distribution to disaster affected communities;

(d) Buying, for consumption or resale, from the recipient disaster affected persons any relief goods, equipment or other aid commodities received by them;

(e) Selling of relief goods, equipment or other aid commodities which are intended for distribution to disaster victims;

(f) Forcibly seizing relief goods, equipment or other aid commodities intended for or consigned to a specific group of victims or relief agency;

(g) Diverting or misdelivery of relief goods, equipment or other aid commodities to persons other than the rightful recipient or consignee;

(h) Accepting, possessing, using or disposing relief goods, equipment or other aid commodities not intended for nor consigned to him/her;

(i) Misrepresenting the source of relief goods, equipment or other aid commodities by:

(1) Either covering, replacing or defacing the labels of the containers to make it appear that the goods, equipment or other aid commodities came from another agency or persons;

(2) Repacking the! goods, equipment or other aid commodities into containers with different markings to make it appear that the goods came from another agency or persons or was released upon the instance of a particular agency or persons;

(3) Making false verbal claim that the goods, equipment or other and commodity m its untampered original containers actually came from another agency or persons or was released upon the instance of a particular agency or persons;

(j) Substituting or replacing relief goods, equipment or other aid commodities with the same items or inferior/cheaper quality;

(k) Illegal solicitations by persons or organizations representing others as defined in the standards and guidelines set by the NDRRMC;

(l) Deliberate use of false at inflated data in support of the request for funding, relief goods, equipment or other aid commodities for emergency assistance or livelihood projects; and

(m) Tampering with or stealing hazard monitoring and disaster preparedness equipment and paraphernalia.

Section 20. Penal Clause. - Any individual, corporation, partnership, association, or other juridical entity that commits any of the prohibited acts provided for in Section 19 of this Act shall be prosecuted and upon conviction shall suffer a fine of not less than Fifty thousand pesos (Php50,000.00) or any amount not to exceed Five hundred thousand pesos (php500,000.00) or imprisonment of not less than six (6) years and one (1) day or more than twelve (12) years, or both, at the discretion of the court, including perpetual disqualification from public office if the offender IS a public officer, and confiscation or forfeiture in favor of the government of the objects and the instrumentalities used in committing any of herein prohibited acts.

If the offender is a corporation, partnership or association, or other juridical entity, the penalty shall be imposed upon the officer or officers of the corporation, partnership, association or entity responsible for the violation without prejudice to the cancellation or revocation of these entities license or accreditation issued to them by any licensing or accredited body of the government. If such offender is an alien, he or she shall, in addition to the penalties prescribed in this Act, be deported without further proceedings after service of the sentence.

However, the prosecution for offenses set forth in Section 19 of this Act shall be without prejudice to any liability for violation of Republic Act No. 3185, as amended, otherwise known as the Revised Penal Code, and other civil liabilities.

Section 21. Local Disaster Risk" Reduction and Management Fund (LDRRMF). - The present Local Calamity Fund shall henceforth be known as the Local Disaster Risk Reduction and Management Fund (LDRRMF). Not less than five percent (5%) of the estimated revenue from regular sources shall be set aside as the LDRRMF to support disaster risk management activities such as, but not limited to, pre-disaster preparedness programs including training, purchasing life-saving rescue equipment, supplies and medicines, for post-disaster activities, and for the payment of premiums on calamity insurance. The LDRRMC shall monitor and evaluate the use and disbursement of the LDRRMF based on the. LDRRMP as incorporated in the local development plans and annual work and financial plan. Upon the recommendation of the LDRRMO and approval of the sanggunian concerned, the LDRRMC may transfer the said fund to support disaster risk reduction work of other LDRRMCs which are declared under state of calamity.

Of the amount appropriated for LDRRMF, thirty percent (30%) shall be allocated as Quick Response Fund (QRF) or stand-by fund for relief and recovery programs in order that situation and living conditions of people In communities or areas stricken by disasters, calamities, epidemics, or complex emergencies, may be normalized as quickly as possible.

Unexpended LDRRMF shall accrue to a special trust fund solely for the purpose of supporting disaster risk reduction and management activities of the LDRRMCs within the next five (5) years. Any such amount still not fully utilized after five (5) years shall revert back to the general fund and will be available for other social services to be identified by the local sanggunian.

Section 22. National Disaster Risk" Reduction and Management Fund. - (a) The present Calamity Fund appropriated under the annual General Appropriations Act shall henceforth be known as the National Disaster Risk Reduction and Management Fund (NDRRM Fund) and it shall be used for disaster risk reduction or mitigation, prevention and preparedness activities such as but not limited to training of personnel, procurement of equipment, and capital expenditures. It can also be utilized for relief, recovery, reconstruction and other work or services in connection with natural or human induced calamities which may occur during the budget year or those that occurred in the past two (2) years from the budget year.

(b) The specific amount of the NDRRM Fund and the appropriate recipient agencies and/or LGUs shall be determined upon approval of the President of the Philippines in accordance with the favorable recommendation of the NDRRMC.

(c) Of the amount appropriated for the NDRRM Fund, thirty percent (30%) shall be allocated as Quick Response Fund (QRF) or stand-by fund for relief and recovery programs in order that situation and living conditions of people in communities or areas stricken by disasters, calamities, epidemics, or complex emergencies, may be normalized as quickly as possible.

(d) All departments/agencies and LGUs that are allocated with DRRM fund shall submit to the NDRRMC their monthly statements on the utilization of DRRM funds and make an accounting thereof in accordance with existing accounting and auditing rules.

(e) All departments, bureaus, offices and agencies of the government are hereby authorized to use a portion of their appropriations to implement projects designed to address DRRM activities in accordance with the guidelines to be issued by the NDRRMC in coordination with the DBM.

Section 23. Funding of the OCD. - As lead agency to carry out the provisions of this Act, the OCD shall be allocated a budget of One billion pesos (Php1,000,000,000.00) revolving fund starting from the effectivity of this Act.

Section 24. Annual Report. - The National Council, through the OCD, shall submit to the Office of the President, the Senate and the House of Representatives, within the first quarter of the succeeding year, an annual report relating to the progress of the implementation of the NDRRMP.

Section 25. Implementing Rules and Regulations. - The NDRRMC. through its Chairperson. shall issue the necessary rules and regulations for the effective implementation of this Act within ninety (90) days after approval of this Act. The OCD. in consultation with key stakeholders. shall take the lead in the preparation of the implementing rules and regulations with the active involvement of the technical management group of the NDRRMC.

Section 26. Congressional Oversight Committee. - There is hereby created a Congressional Oversight Committee to monitor and oversee the implementation of the provisions of this Act. The Committee shall be composed of six (6) members from the Senate and six (6) members from the House of Representatives with the Chairpersons of the Committees on National Defense and Security of both the Senate and the House of Representatives as joint Chairpersons of this Committee. The five (5) other members from each Chamber are to be designated by the Senate President and the Speaker of the House of Representatives. respectively. The minority shall be entitled to pro rata representation but shall have at least two (2) representatives from each Chamber.

Section 27. Sunset Review. - Within five (5) years after the effectivity of this Act, or as the need arises, the Congressional Oversight Committee shall conduct a sunset review. For purposes of this Act, the term "sunset review" shall mean a systematic evaluation by the Congressional Oversight Committee of the accomplishments and impact of this Act, as well as the performance and organizational structure of its implementing agencies, for purposes of determining remedial legislation.

Section 28. Repealing Clause. - Presidential Decree No. 1566 and all other laws, decrees, executive orders, proclamations and other executive issuance's which are inconsistent with or contrary to the provisions of this Act are hereby amended or repealed accordingly.

Section 29. Separability Clause. - If any provision of this Act shall be held unconstitutional or invalid, the other provisions not otherwise affected shall remain in full force and effect.

Section 30. Effectivity Clause. - This Act shall take effect fifteen (15) days following its complete publication in the Official Gazette or in two (2) national newspapers of general circulation.

Approved: May 27, 2010

October 23, 2009

AN ACT MAINSTREAMING CLIMATE CHANGE INTO GOVERNMENT POLICY FORMULATIONS, ESTABLISHING THE FRAMEWORK STRATEGY AND PROGRAM ON CLIMATE CHANGE, CREATING FOR THIS PURPOSE THE CLIMATE CHANGE COMMISSION, AND FOR OTHER PURPOSES

• See IRR here

SECTION 1. Title.—This Act shall be known as the “Climate Change Act of 2009”.

SECTION 2. Declaration of Policy. – It is the policy of the State to afford full protection and the advancement of the right of the people to a healthful ecology in accord with the rhythm and harmony of nature. In this light, the State has adopted the Philippine Agenda 21 framework which espouses sustainable development, to fulfill human needs while maintaining the quality of the natural environment for current and future generations.

Towards this end, the State adopts the principle of protecting the climate system for the benefit of humankind, on the basis of climate justice or common but differentiated responsibilities and the Precautionary Principle to guide decision-making in climate risk management. As a party to the United Nations Framework Convention on Climate Change (UNFCCC), the State adopts the ultimate objective of the Convention which is the stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system which should be achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner. As a party to the Hyogo Framework for Action, the State likewise adopts the strategic goals in order to build national and local resilience to climate change-related disasters.

Recognizing the vulnerability of the Philippine archipelago and its local communities, particularly the poor, women, and children, to potential dangerous consequences of climate change and global warming such as increasing temperatures, rising seas, changing landscapes, increasing frequency and/or severity of droughts, fire, floods and storms, climate-related illnesses and diseases, damage to ecosystems, biodiversity loss that affect the country’s environment, culture, and economy, the State shall cooperate with the global community in the resolution of climate change issues, including disaster risk reduction. It shall be the policy of the State to enjoin the participation of national and local governments, businesses, nongovernment organizations, local communities and the public to prevent and reduce the adverse impacts of climate change and, at the same time, maximize the potential benefits of climate change. It shall also be the policy of the State to incorporate a gender-sensitive, pro-children and pro-poor perspective in all climate change and renewable energy efforts, plans and programs. In view thereof, the State shall strengthen, integrate, consolidate and institutionalize government initiatives to achieve coordination in the implementation of plans and programs to address climate change in the contest of sustainable development.

Further recognizing that climate change and disaster risk reduction and management are closely interrelated and effective disaster risk reduction and management will enhance adaptive capacity to climate change, climate variability and extreme climate events, the State shall integrate disaster risk reduction into climate change programs and initiatives.

Cognizant of the need to ensure that national and sub-national government policies, plans, programs and projects are founded upon sound environmental considerations and the principle of sustainable development, it is hereby declared the policy of the State to systematically integrate the concept of climate change in various phases of policy formulation, development plans, poverty reduction strategies and other development tools and techniques by all agencies and instrumentalities of the government.

SECTION 3. Definition of Terms. – For purposes of this Act, the following shall have the corresponding meanings:

(a) ‘Adaptation’ refers to the adjustment in natural or human systems in response to actual or expected climatic stimuli or their effects, which moderates barn or exploits beneficial opportunities.

(b) ‘Adaptive capacity’ refers to the ability of ecological, social or economic systems to adjust to climate change including climate variability and extremes, to moderate or offset potential damages and to take advantage of associated opportunities with changes in climate or to cope with the consequences thereof.

(c) ‘Anthropogenic causes’ refer to causes resulting from human activities or produced by human beings.

(d) ‘Climate Change’ refers to a change in climate that can be identified by changes in the mean and/or variability of its properties and that persists for an extended period typically decades or longer, whether due to natural variability or as a result of human activity.

(e) ‘Climate Finance’ refers to resources that have been allocated or may be utilized towards the climate change adaptation and mitigation requirements of the country and its vulnerable communities.

(f) ‘Climate Variability’ refers to the variations in the average state and in other statistics of the climate on all temporal and spatial scales beyond that of individual weather events.

(g) ‘Climate Risk’ refers to the product of climate and related hazards working over the vulnerability of human and natural ecosystems.

(h) ‘Disaster’ refers to a serious disruption of the functioning of a community or a society involving widespread human, material, economic or environmental losses and impacts which exceed the ability of the affected community or society to cope using its own resources.

(i) ‘Disaster Risk Reduction and Management (DRRM)’ refers to the systematic process of using administrative directives, organizations, and operational skills and capacities to implement strategies, policies and improved coping capacities in order to lessen the adverse impacts of hazards and the possibility of disaster. Prospective Disaster Risk Reduction and Management refers to risk reduction and management activities that address and seek to avoid the development of new or increased disaster risks, especially if risk reduction policies are not put in place.

(j) ”Gender mainstreaming’ refers to the strategy for making the concerns and experiences of women as well as those of men an integral dimension of the design, implementation, monitoring, and evaluation of policies and programs in all political, economic, environmental or ecological and societal spheres so that women and men benefit equally and inequality is not perpetuated. It is the process of assessing the implications for women and men of any planned action, including legislation, policies, or programs in all areas and at all levels.

(k) ‘Global Warming’ refers to the increase in the average temperature of the Earth’s near-surface air and oceans that is associated with the increased concentration of greenhouse gases in the atmosphere.

(I) ‘Greenhouse effect’ refers to the process by which the absorption of infrared radiation by the atmosphere warms the Earth.

(m) ‘Greenhouses gases (GHG)’ refers to constituents of the atmosphere that contribute to the greenhouse effect including, but not limited to, carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulfur hexafluoride.

(n) ‘Mainstreaming’ refers to the integration of policies and measures that address climate change into development planning and sectoral decision-making.

(o) ‘Mitigation’ in the context of climate change, refers to human intervention to reduce anthropogenic emissions sources and enhance removals by sinks of all GHG, including- ozone-depleting substances and their substitutes.

(p) ‘Mitigation potential shall refer to the scale of GHG reductions that could be made, relative to emission baselines, for a given level of carbon price (expressed in cost per unit of carbon dioxide equivalent emissions avoided or reduced).

(a) ‘Sea level rise’ refers to an increase in sea level which may be influenced by factors like global warming through expansion of sea water as the oceans warm and melting of ice over land and local factors such as land subsidence.

(r) ‘Vulnerability’ refers to the degree to which a system is susceptible to, or unable to cope with, adverse effects of climate change, including climate variability and extreme climate events. Vulnerability is a function of the character, magnitude, and rate of climate change and variation to which a system is exposed, its sensitivity, and its adaptive capacity.

SECTION 4. Creation of the Climate Change Commission. – There is hereby established a Climate Change Commission, hereinafter referred to as the Commission.

Thu Commission shall be an independent and autonomous body and shall have the same status as that of a national government agency. It shall be attached to the Office of the President.

The Commission shall be the lead policy-making body of the government, which shall be tasked to coordinate, monitor and evaluate the programs and action plans of the government in order to ensure the mainstreaming of climate change into the national, sectoral and local development plans and programs pursuant to the provisions of this Act.

The Commission shall be organized within sixty (80) days from the effectivity of this Act.

SECTION 5. Composition of the Commission. – The Commission shall be composed of the President, of the Republic of the Philippines who shall serve as the Chairperson, and three (3) Commissioners to be appointed by the President, one of whom shall be appointed as Vice Chairperson of the Commission.

The Commission shall have an advisory board composed of the following:

(a) Secretary of the Department of Agriculture;

(b) Secretary of the Department of Budget and Management;

(c) Secretary of the Department of Energy;

(d) Secretary of the Department of Environment and Natural Resources;

(e) Secretary of the Department of Education;

(f) Secretary of the Department of Finance;

(g) Secretary of the Department of Foreign Affairs;

(h) Secretary of the Department of Health;

(i) Secretary of the Department of Interior and Local Government;

(j) Secretary of the Department of National Defense, in his capacity as Chair of the National Disaster Risk Reduction and Management Council;

(k) Secretary of the Department of Public Works and Highways;

(l) Secretary of the Department of Science and Technology;

(m) Secretary of the Department of Social Welfare and Development;

(n) Secretary of the Department of Trade and Industry;

(o) Secretary of the Department of Transportation and Communications;

(p) Director-General of the National Economic and Development Authority, in his capacity as Socioeconomic Planning Secretary and Chair of the Philippine Council for Sustainable Development (PCSD);

(q) Director-General of the National Security Council;

(r) Chairperson of the Philippine Commission on Women;

(s) Chairperson of the National Youth Commission;

(t) President of the Sangguniang Kabataan National Federation;

(u) President of the League of Provinces;

(v) President of the League of Cities;

(w) President of the League of Municipalities;

(x) President of the Liga ng mga Barangay;

(y) Representative from the academe;

(aa) Representative from the business sector; and

(aa) Representative from nongovernmental organizations.

At least one (1) of the sectoral representatives shall come from the disaster risk reduction community.

The representatives shall be appointed by the President from a list of nominees submitted by their respective groups and endorsed by the Commission. They shall serve for a maximum term of six (6) years: Provided, however, That such appointment, may be terminated by the President on the basis of the withdrawal of endorsement by or recommendation of the sector they represent. Appointment to any vacancy shall be only for the unexpired term of the predecessor.

Ex officio members of the advisory board may appoint their respective permanent alternate representatives who shall have the rank of an Undersecretary.

SECTION 6. Meetings of the Commission. – The Commission shall convene every first or last. Monday of every third month, or as often as it may deem necessary.

In the event that the Chairperson cannot preside the meeting, the Vice Chairperson shall undertake such function; Provided, however, That a resolution or decision shall be approved by the majority of the three (3) Commissioners: Provided, further, That the Chairperson may vote any decisions of the Commission within thirty (30) days from receipt of the same.

SECTION 7. Qualifications, Tenure, Compensation and Removal of Commissioners. – The Commissioners must be Filipino citizens, residents of the Philippines, at least thirty (30) years of age at the time of appointment, with proven experience on climate change and of proven honesty and integrity. The Commissioners shall be experts in climate change by virtue of their educational background, training and experience: Provided, That at least, one (1) Commissioner shall be female: Provided, further, That in no case shall the

Commissioners come from the same sector: Provided, finally, That in no case shall any of the Commissioners appoint representatives to act on their behalf.

The Commissioners shall hold office for a period of six (6) years, and may be subjected to reappointment: Provided, That no person shall serve for more than two (2) consecutive terms: Provided, further, That, in case of a vacancy, the new appointee shall fully meet the qualifications of a Commissioner and shall hold office for the unexpired portion of the term only: Provided, furthermore, That in no case shall a Commissioner be designated in a temporary or acting capacity: Provided, finally, That any Commissioner may be removed from office before the expiration of his/her term for cause or due to incapacity and in accordance with due process required by pertinent laws.

The Vice Chairperson and the Commissioners shall have the rank and privileges of a Department Secretary and Undersecretary, respectively. They shall be entitled to corresponding compensation and other emoluments and shall be subject to the same disqualifications.

SECTION 8. Climate Change Office.—There is hereby created a Climate Change Office that shall assist the Commission. It shall be headed by a Vice Chairperson of the Commission who shall act as the Executive Director of the Office. The Commission shall have the authority to determine the number of staff and create corresponding positions necessary to facilitate the proper implementation of this Act, subject to civil service laws, rules and regulations. The officers and employees of the Commission shall be appointed by the Executive Director.

SECTION 9. Powers and Functions of the Commission. – The Commission shall have the following powers and functions:

(a) Coordinate and synchronize climate change programs in consultation with national government agencies and other stakeholders;

(b) Formulate a Strategic Framework on Climate Change to serve as the basis for a program for climate change planning, research and development, extension, and monitoring of activities on climate change;

(c) Exercise policy coordination to ensure the attainment of goals sat in the strategic framework and program on climate change;

(d) Recommend legislation, policies, strategies, programs on and appropriations for climate change adaptation and mitigation and other related activities;

(e) Recommend key development investments in climate-sensitive sectors such as water resources, agriculture, forestry, coastal and marine resources, health, and infrastructure to ensure the achievement of national sustainable development goals;

(f) Create an enabling environment for the design of relevant and appropriate risk-sharing and risk-transfer instruments;

(g) Create an enabling environment that shall promote broader multi-stakeholder participation and integrate climate change mitigation and adaptation;

(h) Formulate strategies for mitigating GHG emissions, anthropogenic sources and enhance removal by sinks;

(i) Coordinate and establish a close partnership with the National Disaster Risk Reduction and Management Council in order to increase efficiency and effectiveness in reducing the people’s vulnerability to climate-related disasters;

(j) In coordination with the Department of foreign Affairs, represent the Philippines in the climate change negotiations, constitute and lead the Philippine panel of negotiators to the UNFCCC and the formulation of official Philippine positions on climate change negotiation issues, and decision areas in the international negotiation arena;

(k) Formulate and update guidelines for determining vulnerability to climate change impacts and adaptation assessments and facilitate the provision of technical assistance for their implementation and monitoring;

(l) Coordinate with local government units (LGU’s) and private entities to address vulnerability to climate change impacts of regions, provinces, cities and municipalities;

(m) Facilitate capacity building for local adaptation planning, implementation and monitoring of climate change initiatives in vulnerable and marginalized communities and areas;

(n) Promote and provide technical and financial support to local research and develop merit programs and projects in vulnerable and marginalized communities and areas;

(o) Oversee the dissemination of information on climate change, local vulnerabilities and risks, relevant laws and protocols and adaptation and mitigation measures;

(p) Establish a coordination mechanism with the concerned government agencies and other stakeholders to ensure transparency and coherence in the administration of climate funds taking into consideration the official Philippine position in international negotiations; and

(q) Perform such other functions as may be necessary for the effective implementation of this Act.

SECTION 10. Panel of Technical Experts.—The Commission shall constitute a national panel of technical experts consisting of practitioners in disciplines that are related to climate change, including disaster risk reduction.

The Panel shall provide technical advice to the Commission in climate science, technologies, and best practices for risk assessment and enhancement of adaptive capacity of vulnerable human settlements to potential impacts of climate change.

The Commission shall set the qualifications and compensation for the technical experts. It shall provide resources for the operations and activities of the Panel.

SECTION 11. National Strategic Framework and Program on Climate Change. – The Commission shall, within six (6) months from the effectivity of this Act, formulate a National Strategic Framework on Climate Change. The Framework shall serve as the basis for climate change planning, research and development, extension, monitoring of activities, and climate financing, to protect vulnerable and marginalized communities from the adverse effects of climate change.

The Framework shall be formulated based on climate change vulnerabilities, specific adaptation needs, and mitigation potential, and in accordance with the international agreements.

The Framework shall be reviewed every three (3) years, or as may be deemed necessary. The review of the Framework shall involve a participatory and interactive process.

SECTION 12. Components of the National Strategic Framework and Program on Climate Change. – The Framework shall include, but not limited to, the following components:

(a) National priorities;

(b) Impact, vulnerability and adaptation assessments;

(c) Policy formulation;

(d) Compliance with international commitments;

(e) Research and development;

(f) Database development and management;

(g) Academic programs, capability building and mainstreaming;

(h) Advocacy and information dissemination;

(i) Monitoring and evaluation; and

(j) Gender mainstreaming.

SECTION 13. National Climate Change Action Plan.—The Commission shall formulate a National Climate Change Action Plan in accordance with the Framework within one (1) year after the formulation of the latter.

The National Climate Change Action Plan shall include, but not limited to, the following components:

(a) Assessment of the national impact of climate change;

(b) The identification of the most vulnerable communities/areas, including ecosystems to the impacts of climate change, variability and extremes;

(c) The identification of differential impacts of climate change on men, women and children;

(d) The assessment and management of risk and vulnerability;

(e) The identification of GHG mitigation potentials; and

(f) The identification of options, prioritization of appropriate adaptation measures for joint projects of national and local governments.

SECTION 14. Local Climate Change Action Plan.—The LGUs shall be the frontline agencies in the formulation, planning and implementation of climate change action plans in their respective areas, consistent with the provisions of the Local Government Code, the Framework, and the National Climate Change Action Plan.

Barangays shall be directly involved with municipal and city governments in prioritizing climate change issues and in identifying and implementing best practices and other solutions. Municipal and city governments shall consider climate change adaptation, as one of their regular functions. Provincial governments shall provide technical assistance, enforcement and information management in support of municipal and city climate change action plans. Inter-local government unit collaboration shall be maximized in the conduct of climate-related activities.

LGUs shall regularly update their respective action plans to reflect changing social, economic, and environmental conditions and emerging issues. The LGUs shall furnish the Commission with copies of their action plans and all subsequent amendments, modifications and revisions thereof, within one (1) month from their adoption. The LGUs shall mobilize and allocate necessary personnel, resources and logistics to effectively implement their respective action plans.

The local chief executive shall appoint the person responsible for the formulation and implementation of the local action plan.

It shall be the responsibility of the national government to extend technical and financial assistance to LGUs for the accomplishment of their Local Climate Change Action Plans.

The LGU is hereby expressly authorized to appropriate and use the amount from its Internal Revenue Allotment necessary to implement said local plan effectively, any provision in the Local Government Code to the contrary notwithstanding.

SECTION 15. Role of Government Agencies. – To ensure the effective implementation of the framework strategy and program on climate change, concerned agencies shall, perform the following functions:

(a) The Department of Education (DepED) shall integrate climate change into the primary and secondary education curricula and/or subjects, such as, but not limited to, science, biology, sibika, history, including textbooks, primers and other educational materials, basic climate change principles and concepts;

(b) The Department of the Interior and Local Government (DILG) and Local Government Academy, in coordination with the National Economic and Development Authority and other concerned agencies, shall facilitate; the development and provision of a capacity-building program for LGUs in climate change, including the provision of necessary and appropriate technology. The program shall include socioeconomic, geophysical, policy, and other content necessary to address the prevailing and forecasted conditions and risks of particular LGUs. It shall likewise focus on women and children, especially in the rural areas, since they are the most vulnerable;

(c) The Department of Environment and Natural Resources (DENR) shall oversee the establishment and maintenance of a climate change information management system and network, including on climate change risks, activities and investments, in collaboration with other concerned national government agencies, institutions and LGUs

(d) The Department of Foreign Affairs (DFA) shall review international agreements related to climate change and make the necessary recommendation for ratification and compliance by the government on matters pertaining thereto;

(e) The Philippine Information Agency (PIA) shall disseminate information on climate change, local vulnerabilities and risk, relevant laws and protocols and adaptation and mitigation measures;

(f) The Department of Finance (DOF) shall coordinate with the Commission on matters concerning fiscal policies related to climate change and monitor and report measures involving climate finance;

(g) The Department of Budget and Management (DBM) shall undertake the formulation of the annual national budget in a way that ensures the appropriate prioritization and allocation of funds to support climate change-related programs and projects in the annual program of government;

(h) The Department, of Science and Technology (DOST), through the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), shall promote, assist and, where appropriate, undertake scientific and technological research and development, projections and analysis of future climate scenarios, including activities relative to observation, collection, assessment and processing of climate-related data such as, but not limited to, rainfall, sea-level-rise, extreme climate events, rise in temperatures, and records of severe droughts monitored over long periods of time, in coordination with LGUs in priority/target monitoring sites, for the benefit of agriculture, natural resources, commerce and industry and in other areas identified to be vital to the country’s development; and

(i) Government financial in institutions, except Bangko Sentral ng Pilipinas (BSP) shall, any provision in their respective charters to the contrary notwithstanding, provide preferential financial packages for climate change-related projects. In consultation with the BSP, they shall, within thirty (30) days from the effectivity of this Act, issue and promulgate the implementing guidelines therefor.

SECTION 16. Coordination with Various Sectors. – In the development and implementation of the National Climate Change Action Plan, and the local action plans, the Commission shall consult and coordinate with the nongovernment organizations (NGOs), civic organizations, academe, people’s organizations, the private and corporate sectors and other concerned stakeholder groups.

SECTION 17. Authority to Receive Donations and/or Grants. – The Commission is hereby authorized to accept grants, contributions, donations, endowments, bequests, or gifts in cash, or in kind from local and foreign sources in support of the development and implementation of climate change programs and plans; Provided, That in case of donations from foreign governments, acceptance thereof shall be subject to prior clearance and approval of the President of the Philippines upon recommendation of the Department of Finance: Provided, further, That such donations shall not be used to fund personal services expenditures and other operating expenses of the Commission.

The proceeds shall be used to finance:

(a) Research, development, demonstration and promotion of technologies;

(b) Conduct of assessment of vulnerabilities to climate change impacts, resource inventory, and adaptation capability building;

(c) Advocacy, networking and communication activities in the conduct of information campaign; and

(d) Conduct of such other activities reasonably necessary to carry out the objectives of this Act, as may be defined by the Commission.

SECTION 18. Creation of the People’s Survival Fund. – A People’s Survival Fund (PSF) is hereby established as a special fund in the National Treasury for the financing of adaptation programs and projects based on the National Strategic Framework.

SECTION 19. Sources of the Fund. – The amount of One billion pesos (P1,000,000,000.00) shall be appropriated under the General Appropriations Act (GAA) as opening balance of the PSF. Thereafter, the balance of the PSF from all sources including the amount appropriated in the GAA for the current year shall not be less than One billion pesos (P1,000,000,000.00): Provided, That the balance of the PSF may be increased as the need arises, subject to review and evaluation by the Office of the President and the Department of Budget and Management (DBM) of the accomplishments of the Commission and other concerned LGUs: Provided, further, That the PSF shall not be used to fund personal services and other operational expenses of the Commission: Provided, furthermore, That the balance of the PSF including the amount appropriated in the GAA which shall form part of the fund shall not revert to the general fund: Provided, finally, That the Commission shall submit to Congress and the DBM a semi-annual physical/narrative and financial report on the utilization of the PSF.

The PSF may be augmented by donations, endowments, grants and contributions, which shall be exempt from donor’s tax and be considered as allowable deductions from the gross income of the donor, in accordance with the provisions of the National Internal Revenue Code of 1997, as amended.

SECTION 20. Uses of the Fund. – The fund shall he used to support adaptation activities of local governments and communities such as, but not limited to, the following:

(a) Adaptation activities, where sufficient information is available to warrant such activities, in the areas of water resources management, land management, agriculture and fisheries, health, infrastructure development, natural ecosystems including mountainous and coastal ecosystems;

(b) Improvement of the monitoring of vector-borne diseases triggered by climate change, and in this context improving disease control and prevention;

(c) Forecasting and early warning systems as part of preparedness for climate-related hazards;

(d) Supporting institutional development, for local governments, in partnership with local communities and civil society groups, for preventive measures, planning, preparedness and management of impacts relating to climate change, including contingency planning, in particular, for droughts and floods in areas prone to extreme climate events;

(e) Strengthening existing; and where needed, establish regional centers and information networks to support climate change adaptation initiatives and projects;

(f) Serving as a guarantee for risk insurance needs for farmers, agricultural workers and other stakeholders; and

(g) Community adaptation support programs by local organizations accredited by the Commission.

The fund shall be suppletory to any annual appropriations allocated by relevant government agencies for climate change-related programs and projects and by LQUs. The fund shall encourage counterpart funding arrangements among local governments, community organizations, the private sector, and other entities.

SECTION 21. The People’s Survival Fund Board. – There is hereby created a People’s Survival Fund Board, hereinafter referred to as the PSF Board, which shall be lodged under the Commission. It shall be composed of the following:

(a) Secretary of the Department of Finance as Chair;

(b) Vice Chairperson of the Commission;

(c) Secretary of the Department of Budget and Management;

(d) Director-General of the National Economic and Development Authority;

(e) Secretary of the Department of the Interior and Local Government;

(f) Chairperson of the Philippine Commission on Women;

(g) A representative from the academe and scientific community;

(h) A representative from the business sector; and

(i) A representative from the NGOs: Provided, That the organizations of the academe and scientific community, business and NGO representatives of the PSF Board are disqualified from accessing the fund during their term, as set by the Commission, and a year after their tenure in the PSF Board shall have been terminated or completed. The said representatives shall be identified nod designated as such by the Commission.

SECTION 22. Powers and Functions of the PSF Board. – The PSF Board, which shall convene at least twice a year, shall have the following powers and functions:

(a) Promulgate policies that will maintain the fiduciary character of the Board;

(b) Provide overall strategic guidance in the management and use of the fund including, but not limited to, the development of funding windows for various adaptation activities, including counterpart funding arrangements, and guidelines for project assessment, approval and evaluation;

(c) Develop social, financial and environmental safeguards to be used in project implementation;

(d) Identify additional sources for the fund;

(e) Issue final approval of projects for the use of the fund;

(f) Adopt a conflict of interest policy to ensure that board members will not vote on projects if they have a direct stake therein; and

(g) Ensure an independent third party evaluation and auditing of activities supported by the fund, taking into consideration the principles of transparency and accountability, and government accounting and auditing roles and regulations.

SECTION 23. Role of the Commission in the Utilization of the People’s Survival Fund. – The Climate Change Office, headed by the Vice Chairperson of the Commission, shall evaluate and review the project proposals, and, with the concurrence and endorsement of a majority of the climate change Commissioners appointed by the President, recommend approval of project proposals to the PSF Board based on the policies, guidelines, and safeguards, agreed by the PSF Board. The Commission shall utilize the expertise of relevant government agencies in its advisory board and the national panel of technical experts in the project appraisal, monitoring and evaluation process. The Commission shall not be a project implementer.

The Commission shall formulate mechanisms that ensure transparency and public access to information regarding funding deliberations and decisions.

The Commission shall develop guidelines to accredit local organizations seeking to access the fund. Organizations will be accredited based on criteria such as organizational independence, track record in the community and/or field of expertise, financial management, and participatory practices.

SECTION 24. Prioritization of Fund Allocation. – The Commission shall develop criteria to prioritize use of the fund based on, but not. limited to, the following:

(a) Level of risk and vulnerability to climate change;

(b) Participation of affected communities in the design of the project;

(c) Poverty reduction potential;

(d) Cost effectiveness and attainability of the proposal;

(e) Identification of potential co-benefits extending beyond LGU territory;

(f) Maximization of multi-sectoral or cross-sectoral benefits;

(g) Responsiveness to gender-differentiated vulnerabilities; and

(h) Availability of climate change adaptation action plan.

SECTION 25. Community Participation. – To ensure transparency and participation of vulnerable and marginalized groups in the adaptation projects to be supported by the fund, community representatives and/or NGO counterparts may participate as observers in the project identification, monitoring and evaluation process of the Commission.

SECTION 26 (18). Funding Allocation for Climate Change.—All relevant government agencies and LGUs shall allocate from their annual appropriations adequate funds for the formulation, development and implementation, including training, capacity building and direct intervention, of their respective climate change programs and plans. It shall also include public awareness campaigns on the effects of climate change and energy-saving solutions to mitigate these effects, and initiatives, through educational and training programs and micro-credit schemes, especially for women in rural areas. In subsequent budget proposals, the concerned offices and units shall appropriate funds for program/project development and implementation including continuing training and education in climate change. HISAET

SECTION 27 (19). Joint Congressional Oversight Committee.—There is hereby created a Joint Congressional Oversight Committee to monitor the implementation of this Act. The Oversight Committee shall be composed of five (5) Senators and five (5) Representatives to be appointed by the Senate President and the Speaker of the House of Representatives, respectively. The Oversight Committee shall be co-chaired by a Senator and a Representative to be designated by the Senate President and the Speaker of the House of Representatives, respectively. Its funding requirement shall be charged against the appropriations of Congress.

SECTION 28 (20). Annual Report.—The Commission shall submit to the President and to both Houses of Congress, not later than March 30 of every year following the effectivity of this Act, or upon the request of the Congressional Oversight Committee, a report giving a detailed account of the status of the implementation of this Act, a progress report on the implementation of the National Climate Change Action Plan and recommend legislation, where applicable and necessary. LGUs shall submit annual progress reports on the implementation of their respective local action plan to the Commission within the first quarter of the following year.

SECTION 29 (21). Appropriations.—The sum of Fifty million pesos (Php50,000,000.00) is hereby appropriated as initial operating fund in addition to the unutilized fund of the Presidential Task Force on Climate Change and the Office of the Presidential Adviser on Global Warming and Climate Change. The sum shall be sourced from the President’s contingent fund.

Thereafter, the amount necessary to effectively carry out the provisions of this Act shall be included in the annual General Appropriations Act.

SECTION 30 (22). Implementing Rules and Regulations. — Within ninety (90) days after the approval of this Act, the Commission shall, upon consultation with government agencies, LGUs, private sector, NGOs and civil society, promulgate the implementing rules and regulations of this Act: Provided, That failure to issue rules and regulations shall not in any manner affect the executory nature of the provisions of this Act.

SECTION 31 (23). Transitory Provisions. — Upon the organization of the Commission, the Presidential Task Force on Climate Change created under Administrative Order No. 171 and the Inter-Agency Committee on Climate Change created by virtue of Administrative Order No. 220, shall be abolished: Provided, That their powers and functions shall be absorbed by the Commission: Provided, further, That the officers and employees thereof shall continue in a holdover capacity until such time as the new officers and employees of the Commission shall have been duly appointed pursuant to the provisions of this Act. All qualified regular or permanent employees who may be transferred to the Commission shall not suffer any loss in seniority or rank or decrease in emoluments. Any employee who cannot be absorbed by the Commission shall be entitled to a separation pay under existing retirement laws.

SECTION 32 (24). Separability Clause.—If for any reason any section or provision of this Act is declared as unconstitutional or invalid, the other sections or provisions hereof shall not be affected thereby.

SECTION 33 (25). Repealing Clause.—All laws, ordinances, rules and regulations, and other issuances or parts thereof which are inconsistent with this Act are hereby repealed or modified accordingly.

SECTION 34 (26). Effectivity.—This Act shall take effect fifteen (15) days after the completion of its publication in the Official Gazette or in at least two (2) national newspapers of general circulation.

Approved on October 23, 2009