Grading the Aquino Administration’s Scorecard on Mining

After almost three years into the Aquino administration, opposition from local government units, civil society organizations, environmental lobbyists, indigenous peoples, and separatists groups remains unabated and continues to hound the mining industry. While the industry looks to the government for much-needed relief, it seems that the efforts exerted by the Aquino administration can be considered as half-hearted.

During the run-up to the 2010 presidential elections, Allan and Associates, a Hong Kong-based security risk management consultancy, made an assessment on the implications of an Aquino presidency for the mining industry. The assessment raised the prospect that Aquino would rely heavily on popular support rather than pursue coherent strategies intended to provide long-term economic and social stability because of his perceived close links with ‘progressive’ elements within the Catholic Church and civil society groups.

According to a Green Electoral Initiative survey led by EcoWaste Coalition and Greenpeace in February 2010, Aquino was inclined to review Republic Act 7942 otherwise known, as the “Philippine Mining Act of 1995” particularly the fiscal incentives in order to maximize the economic benefits from the extractive industry.

In fact during the Foreign Correspondents Association of the Philippines Presidential Forum on 17 October 2012, Aquino confirmed that he didn’t have the confidence that existing laws adequately protect the environment and the government gets its just share from the mining industry. When asked point blank if he favors mining, Aquino responded that the benefits of mining were one-sided in favor of the mining companies stating that: "Extraction is a one-shot deal with attendant risk, there are several risks. And in terms of revenues generated, it is less than 10%. So our people seem to be getting the maximum risk but the least in terms of benefits. And we want to correct that situation."

Under Aquino’s watch, the Department of Environment and Natural Resources (“DENR”) enacted a use-it-or-lose it policy in 2011 to force inactive permit holders to comply with their submitted work programs or risk voiding their contracts, and implemented a moratorium on new mining applications. The moratorium on new mining applications was lifted and the Mines and Geosciences Bureau (“MGB”) accepted and processed new mining applications starting on 18 March 2013. MGB Administrative Order 2013-10 set the guidelines for the new mining applications and increased the mining application fee from Php60 per hectare to Php300-500 per hectare. Resource developers are also reeling from the effects of the revised free and prior informed consent guidelines, which the National Commission on Indigenous Peoples published on 16 May 2012 (NCIP Administrative Order No. 3, Series of 2012) prompting the mining industry to air its concerns and argue that the new rules have severe impact on mining investments. Also, despite the administration’s move to address certain loopholes in the Mining Act with Executive Order No. 79, the rules on mining remain unclear according to some industry players and stakeholders.

There are indeed concerns that Aquino’s links with civil society groups resulted in an anti-mining administration that has passed regulations hostile to the industry. Amado Macasaet, writing for the newspaper Malaya, thinks that the fact that Aquino allowed the South Cotabato provincial board resolution to prevent the $5.9 billion gold-and-copper project of Xtrata Plc from starting operations was admission that he is anti-mining.  To Macasaet, the environmental clearance certificate (“ECC”) issued by the DENR is “a useless piece of paper” because the project continues to be stymied by a provincial ordinance banning open pit mining while the governor stands pat on the resolution of the board.

Nevertheless, following DENR’s decision to issue an ECC to Xtrata’s and allow Philex to resume its operation in Benguet after the mine tailings accident, civil society groups were up in arms against the Aquino administration. In a press release dated 15March 2013, the Kalikasan People’s Network for the Environment stated that environmental groups are shocked in the series of decisions made by DENR and Malacañang allowing foreign and corporate miners to expand large-scale mining operations in the country.

On the other hand, the Alyansa Tigil Mina (“ATM”), an advocacy group on environmental and human rights issues, insists that under EO 79, there is no premium given to the right of local governments and the opposition of mining-affected communities to resist large-scale mining operations in the country. ATM is seeking to revise the current mining policy framework, which according to ATM is aggressively promoting liberalization of the mining industry resulting to widespread environmental destruction and violation of human rights.

2013 Midterm Elections

President Aquino suggested that the mining industry would have to wait for the amendments to the mining law as a more prudent way to undertake the government’s relationship with the industry in general justifying that he is not risking the environment, the health of Filipinos and the loss of resources for some temporary gain. In light of the 2013 midterm elections, the industry is closely analyzing how senatorial candidates are positioning themselves on mining issues and how interest groups support certain candidates on account of their stand on these issues.

ATM is calling on candidates to support the passage of the Alternative Minerals Management Bill that seeks to revise the current mining industry framework. The group declared that it would campaign against at least four (4) senatorial candidates – former senator Richard Gordon and newcomer Jack Enrile, son of Senate President Juan Ponce Enrile, who are both from United Nationalists Alliance, and Representatives Sonny Angara, and Cynthia Villar who are now running under Team PNoy. Villar’s family owns Queensberry Mining, which is directly involved in the King-king copper-gold project in Compostela Valley. Angara is a member of the board of directors of Aurora Pacific Ecozone and Freeport Authority, while Gordon is an independent director of Atlas Mining Corp. Enrile hails from Cagayan “where anti-mining advocates are threatened and some killed,” according to the ATM.

On the other hand, the Makabayan coalition, made up of left-leaning party-list groups - Bayan Muna, Anakpawis, Gabriela, ACT Teachers, Katribu, Migrante, Courage, Akap Bata, Piston and Kalikasan has also joined the fray in endorsing supposedly anti-mining senatorial candidates. With Makabayan's own candidate, Bayan Muna party-list Rep. Teodoro Casiño, the bloc will be supporting the candidacy of Senators Francis Escudero, Aquilino Pimentel III and Loren Legarda, former Las Piñas Representative Cynthia Villar and Grace Poe-Llamanzares. Satur Ocampo, Makabayan President, said that the six candidates have agreed to push for pro-people mining policies and environmental protection.

Jamby Madrigal stands out for having sponsored senate bills on the repeal of the Mining Act. The Catholic Bishops Conference of the Philippines also came out with a list of candidates who are amenable to the passage of an Alternative Minerals Management Bill. Among those in the list are Richard Gordon, Ed Hagedorn, Mitos Magsaysay and Migs Zubiri.

Mining Act Revisited

Nine years after the Supreme Court ruled that Mining Act was constitutional, the Court is once again reviewing petitions assailing its legality. During oral arguments held on 16 April 2013, the SC tackled issues raised by petitioners headed by then Akbayan party list Rep. Risa Hontiveros, Bayan Muna party list Rep. Teddy Casiño and House Deputy Speaker and Quezon Rep. Lorenzo 'Erin' Tañada III of the ruling Liberal Party of President Aquino on the validity of sections 80 and 81 of the Mining Act. Surprisingly, feuding party-list groups Bayan Muna and Akbayan set aside their differences and agree to unite in their petition.

The petitioners argued that both are unconstitutional because they foster inequitable sharing of wealth. Sec. 80 limits the share of the government in Mineral Production Sharing Agreement (“MPSA”) to excise taxes while Sec. 81 confines government's share to taxes, fees and royalties instead of letting it have full control over the exploration, development and utilization of mineral resources. The petitioners also sought a temporary restraining order that would stop the DENR from acting on MPSA applications, and asked the SC to cancel the MPSAs of Hallmark Mining Corporation and Austral-Asia Link Mining Corp in Davao Oriental.

The DENR argued that the petitions should be dismissed outright because the SC had already ruled on the constitutionality of the Mining Act in the December 2004 decision of the High Court in La Bugal-B'laan Tribal Association v. Ramos. Newly appointed Justice Marvic Leonen inhibited from the case because he was a petitioner in the La Bugal case.

The Next Three Years?

The industry may have been resigned to the fact that it could well be the next President who will be more supportive of mining. Adding to this resignation is

the draft order that the administration is considering to tighten mining rules, cut tax breaks, review resource contracts, introduce competitive bidding for mining rights, widen a ban on mining to more areas, mandate downstream processing of minerals, ban direct shipping of raw or unprocessed strategic metallic ores, and demand economic valuations before allowing projects to proceed. The draft order reeks of resource nationalism as the Philippine government moves beyond taxation by introducing additional requirements affecting the commercial feasibility of mining projects.

It is no consolation too that Aquino may justify his tightening on the industry knowing fully well that the impressive growth rates in the economy recently affirmed by the much-coveted and long-awaited investment grade rating was made possible even without the contribution from big ticket mining projects.

As the nation goes to the polling booths for the mid-term elections with certain candidates having an alternative mining bill limiting foreign ownership in their platforms of government and the SC reexamining the Mining Act, the industry waits with bated breath the outcome of these developments.

Fernando “Ronnie” Penarroyo is the Managing Partner of Puno and Penarroyo Law Offices (fspenarroyo@punopenalaw.com). He specializes in Energy, Resources and Environmental Law, Business Development and Project Finance. He is a trustee of the Philippine Mining and Exploration Association, Inc. He was a volunteer lawyer for Noynoy Aquino during the 2010 presidential elections.