Malampaya royalty sharing ends

Posted on 10:50 PM, September 22, 2010

THE NATIONAL GOVERNMENT has gained full control over royalties from the Malampaya deep water gas-to-power project after a 2005 interim agreement it signed with the Palawan government that gave the province part of royalties it has been claiming lapsed last June 30, a Cabinet secretary told reporters on Tuesday.

Budget Secretary Florencio B. Abad said this means the national government no longer has to give Palawan a share in the royalties, which totaled some P73 billion as of end-2009.

The Palawan government has been claiming 40% of royalties from the project, arguing that it is located within the province’s municipal waters -- a claim the national government has disputed.

Palawan has cited as basis for its claim Section 290 of Republic Act No. 7160, or the Local Government Code of 1991, which said in part that "local government units shall, in addition to the internal revenue allotment, have a share of 40% of the gross collection derived by the national government from the preceding fiscal year...from its share in any... production-sharing agreement in the utilization and development of the national wealth within their territorial jurisdiction."

Shell Philippines Exploration B.V. and Chevron Malampaya LLC each holds 45% of the project, while the PNOC Exploration Corp. has 10%.

The service contract provided a production-sharing scheme, whereby the national government gets 60% of earnings from project operations, after deducting various charges. Palawan has been claiming 40% of the national government’s share.

Mr. Abad particularly cited an agreement the departments of Finance, Energy and Budget and Management signed on Feb. 9, 2005 with the Palawan provincial government, subsequently amended by a Provisional Implementation Agreement on July 27, 2007, which stipulated that the national and the provincial governments will have an equal share in the disputed 40% until the Supreme Court rules with finality on the row or until the interim agreement lapses on June 30, 2010, whichever comes earlier. It was only on Jan. 30, 2008 that the departments concerned issued Joint Circular No. 3, providing the guidelines for the release of funds under that agreement.

"Since the agreement no longer operates, then all the proceed go to national government," the Budget chief told reporters.

It will be recalled that the provincial government, led by then Gov. Joel T. Reyes, and civil society groups filed a case with the Palawan Regional Trial Court in 2003, arguing that the province has jurisdiction over the project site since it lies within municipal waters.

This, in turn, entitles the province to 40% of the royalties under RA 7160, they said.

Palawan lost the case up to the Court of Appeals in 2006, prompting the province and its allies to elevate it to the Supreme Court, where it now awaits resolution.

Calls to Palawan Gov. Abraham Khalil Mitra remained unanswered as of late yesterday afternoon.

But sought for comment, Herminio Harry L. Roque, counsel for the civil societies concerned, said by phone yesterday: "We may file a supplemental motion before the Supreme Court, questioning the effectivity of the interim agreement." -- PPM