EXECUTIVE ORDER NO. 462
EXECUTIVE ORDER NO. 462 - ENABLING
PRIVATE SECTOR PARTICIPATION IN THE EXPLORATION, DEVELOPMENT,
UTILIZATION AND COMMERCIALIZATION OF OCEAN, SOLAR AND WIND ENERGY
RESOURCES FOR POWER GENERATION AND OTHER ENERGY USES
WHEREAS,
Sec. 2 of Article 12 of the Constitution provides that “all lands of
the public domain, waters, minerals, coal, petroleum and other mineral
oils, all forces of potential energy, fisheries, forest or timber,
wildlife, flora and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other natural
resources shall not be alienated. The exploration, development and
utilization of natural resources shall under the full control and
supervision of the State. The State may directly undertake such
activities, or it may enter into co-production, joint venture or
production-sharing agreements with Filipino citizens or corporations or
associations at least sixty per centum of whose capital is owned by
such citizens”;
WHEREAS, Presidential Decree No. 1068 issued on January 12, 1977
directed the “acceleration of research, development and utilization of
nonconventional energy resources” and Republic Act 7638 of December 9,
1992 mandated the Department of Energy (DOE) to “formulate and
implement a program for the accelerated development of nonconventional
energy systems and the promotion and commercialization of its
application”;
WHEREAS, ocean, solar and wind (OSW) energy resources are forces of
potential energy which are nonconventional, indigenous, renewable,
environment-friendly and of such abundance that could provide the
Philippines self-sufficiency in energy and possibly surpluses for
export in the future despite high energy demand due to rapid economic
growth;
WHEREAS, it is in the national interest to accelerate the development
and utilization of OSW energy resources by enabling private sector
participation.
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by law, do hereby
order:
Section 1. Exploration, Development and Utilization
of OSW Energy Resources. — Subject to existing rights, the government,
through the DOE, shall engage in the assessment, exploration,
extraction, harnessing, development and utilization of ocean, solar and
wind (OSW) energy resources, preferably with the participation of the
private sector under a production-sharing contract awarded by the
Secretary of the DOE, after due consultation with the host
community/ies and local government unit/s concerned, through public
bidding or negotiation. The production-sharing contractor must be
technically and financially capable of undertaking the operations
required in the contract.
Sec. 2. Scope of Production-Sharing Contracts. —
Production-sharing contracts, as herein authorized, shall be limited to
lands of the public domain and offshore waters within the Philippine
territory, contiguous zone and exclusive economic zone. All lands or
offshore waters covered by contracts granted under this Order shall be
subject to public easements established or recognized by existing laws.
Sec. 3. OSW Energy Projects in Private Domain. —
Energy generation of more than one (1) megawatt from OSW resources in
private lands as well as in privately-held offshore areas shall be
regulated by the DOE through the existing accreditation system for
power plants. Generation projects of one (1) megawatt or less shall be
regulated by the local government unit/s concerned in accordance with
pertinent local energy plan/s, coordinated with the national energy
plan and approved by the DOE.
Sec. 4. Exclusive Privilege. — A
production-sharing contract under this Order shall bestow exclusive
privilege to the contractor for the exploration, development and
utilization of the OSW energy resources in the contract area during the
term of the contract. Such privilege shall be transferable to another
qualified person only upon approval of the Secretary of the DOE.
Sec. 5. Resource-Use Conflicts. — In case other
natural resources are present in the contract area, the multiple-use
concept shall be applied insofar as practicable subject to RA 7586
otherwise known as National Integrated Protected Area System law
(NIPAS). If a natural resource-use conflict is not resolved by multiple
use, the first-come-first-serve principle shall prevail.
Sec. 6. OSW Energy Resources in Government
Reservations. — OSW energy resources in government reservations, except
in areas that have been established and specifically delineated as
protected areas under the procedures prescribed by the NIPAS law, shall
be availed of only through the production-sharing contract system under
this Order.
Sec. 7. Qualification of Contractor. — A
contractor under this Order shall be a qualified natural or juridical
person seeking to explore, develop, utilize and harness OSW energy
resources in the Philippines for purposes of producing power and/or
types of energy. Details of financial, technical and other
qualifications of a contractor shall be specified by the Secretary of
the DOE in the implementing rules and regulations of this Order.
Sec. 8. Production-Sharing Contract Components. —
A production-sharing contract under this Order shall include a
“Pre-Commercial Contract” and a “Pre-Negotiated Commercial Contract”.
The Pre-Commercial Contract shall involve exploration, resource
assessment, piloting, feasibility studies, environment impact studies
and all other studies prior to commercial production. The
Pre-Negotiated Commercial Contract shall provide in terms and
conditions for the commercial phase of the project which shall be
negotiated at the same time as the Pre-Commercial Contract.
Sec. 9. Declaration of Commerciality. — Upon
determination of the commercial feasibility of the project within or at
the end of the “Pre-commercial Contract”, the contractor shall submit
to the Secretary of the DOE a written declaration that the project is
commercially feasible. The Secretary, upon review of the facts
supporting such declaration and after due public consultation with the
host community and local government unit/s concerned, shall issue a
“Letter of Confirmation” which shall automatically bring into force the
“Pre-Negotiated Commercial Contract”.
Sec. 10. Contract Area. — For purposes of the
delineation of OSW energy contract areas under this Order, the
Philippine territory, its contiguous zone and its exclusive economic
zone shall be divided into meridional blocks of one-half (½)
minute of latitude and one-half (½) minute of longitude, each
with an area of about eighty-one (81) hectares. The minimum size of a
contract area for ocean, solar or wind or any combination thereof shall
be one meridional block (about 81 hectares) whether on land or
offshore. The maximum area that can be awarded to a qualified person
shall be 100 blocks (about 8,100 hectares) for wind or solar or their
combination and 1,000 blocks (about 81,000 hectares) for ocean or a
combination of ocean and wind and/or solar, all over the Philippines.
Sec. 11. Occupation Fee. — For contract areas on
land, an occupation fee of fifty pesos (P50.00) per hectare, or a
fraction thereof, shall be paid by the Contractor immediately upon
award of the contract and yearly thereafter at the date of award. Such
payment shall be made to the treasurer of the Municipality or City
where the contract area is located. For contract areas offshore, the
occupation fee of fifty pesos (P50.00) per hectare per year shall be
paid by the contractor to the Treasurer of the Municipality or City
that has jurisdiction over the offshore area immediately upon issuance
of the “Letter of Confirmation” as prescribed in Sec. 9 of this
order. For offshore areas beyond the territorial jurisdiction of any
Municipality or City, as defined in the Local Government Code, the
occupation fee of fifty pesos (P50.00) per hectare per year shall be
paid by the contractor to the DOE immediately upon issuance of said
“Letter of Confirmation”.
This fee shall be allocated to the local government units in accordance
with Sec. 292 of R.A. 7160, otherwise known as the Local Government
Code of 1991. The Secretary of the DOE is authorized to increase the
fee when public interest so requires.
Sec. 12. Relinquishment. — During the
pre-commercial phase of the contract, at least fifty percent (50%) of
the Contract Area held shall be relinquished at the end of every two
years subject to the approval of the Secretary of the DOE. The
relinquished area shall be of a regular shape consisting of contiguous
meridional blocks. The contractor shall specify the final area that
will be retained for the commercial phase of the project in the
“declaration of commerciality”.
Sec. 13. Duration of Contract. — The
Pre-Commercial Contract shall have a maximum period of five (5) years
of solar and/or wind and seven (7) years for ocean or in combination
with solar and/or wind. The Commercial Contract, involving any of the
energy resource or their combination, shall have a maximum duration of
twenty-five (25) years, renewable once for the same number of years.
Sec. 14. Government Share. — Considering the
prospectivity of generating profit from the operation of the contract,
a government share (GS) shall be determined through bidding or
negotiation between the DOE and the contractor. The GS shall include a
signature bonus and production bonus. The signature bonus shall be
given to DOE at the date of signing of the Pre-Negotiated Commercial
Contract upon the issuance of a “Letter of Confirmation” of the
commercial feasibility of the project by the Secretary of the DOE. The
production bonus shall be paid to the DOE at the end of each calendar
year during the commercial phase of the project. To protect the welfare
of electricity consumers, the GS shall be limited to values that shall
not result in electricity prices higher than the contracted selling
rates to electric utility in the area where the project is
located.
Sec. 15. Allocation of Government Share. — The
Government Share as referred to in the preceding section shall be
allocated in accordance with Sec. 290 and 292 of Republic Act No.
7160, otherwise known as the Local Government Code of 1991.
Sec. 16. Incentives for Production-Sharing
Contractor. — The contractor shall be granted incentives and privileges
that are allowed in existing laws; and the government will further
assist, if necessary, pioneering projects in OSW energy development and
commercialization to make them viable.
Sec. 17. Termination and Abandonment. —
Termination and abandonment procedures, primarily for the purpose of
environmental rehabilitation, shall be spelled out in the
production-sharing contract. Commencing from the year of commercial
production, the contractor shall open a “trust account” jointly in the
name of contractor, the DOE and the concerned municipality/ies or
city/ies wherein an amount equivalent to at least one centavo (P0.01)
per kwh of electricity sold shall be deposited in a commercial bank on
a quarterly basis to cover the cost of environmental assurance and
rehabilitation during termination and abandonment. This amount shall be
determined by the Secretary of DOE in consultation with the concerned
host community/ies and local government unit/s based on environmental
assurance requirement per project.
Sec. 18. Environmental Impact Assessment. — The
work program for the pre-commercial phase of a production-sharing
contract shall include environmental impact assessment in accordance
with P.D. 1586, otherwise known as the “Philippine Environmental Impact
Statement (EIS) System”, and its implementing rules and regulations.
The Environmental Compliance Certificate arising from such
environmental impact assessment shall be a supporting document to the
“Declaration of Commerciality”.
Sec. 19. Implementing Unit. — In accordance with
Sec. 8(d) of RA 7638, the Secretary of DOE shall create a service
unit that will provide necessary ancillary services for the
implementation of this Order. Funds for the operations of this unit
shall be defrayed from the appropriate funds of the Office of the
President in 1997 and 1998. Thereafter, the required funds for the
operations of this unit may be included in the budget of the DOE in the
General Appropriations Act.
Sec. 20. Implementing Rules and Regulations. — The
Department of Energy, in coordination with concerned government
agencies shall formulate and issue the necessary implementing rules and
regulations within sixty (60) days after the effectivity of this Order.
Sec. 21. Effectivity. — This Executive Order shall
take effect fifteen (15) days after its publication in at least two (2)
newspapers of general circulation.
DONE in the City of Manila,
this 29th day of December, in the year of Our Lord, Nineteen Hundred
and Ninety-Seven.
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