FAQs on Executive Order 79 on Mining

FAQs on Executive Order 79 on Mining

Here’s a list of Frequently Asked Questions (FAQs) on President Aquino’s mining policy, Executive Order 79, released by the Officeof Executive Secretary Paquito Ochoa.

What are the benefits of Executive Order 79?

TheExecutive Order:

• Sets the policy framework that will guide government and other stakeholders in the implementation and operationalization of mining laws, rules and regulations. It also provides concrete steps and solutions to major issues and concerns of the mining sector.
• Sets the direction and lays the foundation for the implementation of responsible mining policies.
• Aims to improve environmental mining standards and increase revenues to promote sustainable economic development and social growth, both at the national and local levels.

What was the process in involved in the drafting of Executive Order 79?

In October 2011, a mining study group was constituted, which included the Executive Secretary and several members of the Climate Change Adaptation and Mitigation Cabinet Cluster.

Input from different stakeholders were obtained, including those from the following: mining companies and allied industries and services; environmental CSO/NGOs; church groups (e.g., CBCP, Association of Major Religious Superiors of the Philippines); members of the academe; LGUs (e.g., major LGU leagues and other local government officials); different government agencies concerned with mining (i.e., through the Climate Change Adaptation and Mitigation and Economic Development Cabinet Clusters.)

Numerous studies, positions papers and commentaries were also secured and considered by the Study Group and the Cabinet Clusters. All the recommendations and input received were considered in the drafting of the provisions of EO 79.

Does the EO call for a ban or moratorium on mining?

No.Existing mining operations and those with approved contracts before the effectivity of the EO will not be affected, and the government will respect the agreements it has entered into, provided that they comply with existing laws and rules and the new mandates and directives of the EO and mining policies, and that these existing mines are not in areas expressly prohibited by existing laws, in which case appropriate action for

violators will be undertaken.

EO NO. 79 identifies specific zones closed to mining applications, either for contracts, concessions or agreements. These include:

• Areas in the National Tourism Development Plan
• Critical areas and island eco-systems
• Prime agricultural lands covered by RA 6657
• Strategic agriculture and fisheries development zones and fisheries development zones and fish refuge and sanctuaries declared as such by the Department of Agriculture
• Areas already identified under the existing laws on mining, agrarian and protected areas, as well as in sites that may be determined by the Department of Environment and natural Resources (DENR)

Under the EO, no new mining operations will be approved in Palawan, consistent with the following:

• Existing laws such as RA 7942 (Mining Act) and RA 7586 (NIPAS Act)
• Critical areas, island ecosystems, and impact areas of mining that will be declared by the DENR based on existing laws, rules and regulations
• The ecological uniqueness of Palawan’s flora and fauna and the need to protect the same is recognized
• RA 7611 or the Strategic Environmental Plan for Palawan calls for the protection of Palawan’s environment and natural resources
• Recognition of its potential for other forms of investments (eco-tourism such as the Puerto Princesa Underground River)

While existing mining operations will be allowed to continue, the government will be suspending the granting of new mineral agreements until existing mining laws are amended.

Mineral Agreements, as provided for in the Mining Act of 1995, are any of the following: a) Mineral Production Sharing Agreement (MPSA); b) Joint Venture Agreement (JVA); and, c) Co-Production Agreement (CPA). The Mining Act also provides for Financial and Technical Assistance Agreements (FTAA) that the government may enter into. These agreements usually include a permit to explore for mineral deposits as part of the provisions and privileges granted in the contract in preparation for possible mining operations.

Amendments to mining laws will allow for the rationalization of existing revenue-and benefit-sharing schemes and incentives given to mining companies to ensure that the country benefits from the rich mineral resources in its territory. The additional revenues will allow government to have additional funding for other social services such as education and health, in addition to having funds for measures to mitigate the impact of mining on the environment.

While the granting of mineral agreements has been suspended, Exploration Permits may still be granted by the DENR.

An Exploration Permit is an authority granted by the DENR-MGB to allow a person or entity to conduct exploration for minerals in a specified area. This is limited to exploration works only and does not include authority to conduct actual mining or extraction of minerals. However, those who are granted Exploration Permits and who actually discover minerals shall be given preferential option in the grant of a mineral agreement should they wish to pursue the same.

Why can’t the government enter into new mineral agreements since amendments to the existing mining laws have yet to be legislated?

Enteringinto mineral agreements now in the absence of amendments to mining laws will bind the government to possible 25- to 50-year terms that will not give us maximum benefits from the mineral resources. This will allow future administrations and future generations to realize the full benefits of mineral resource utilization and not be bound by decisions and agreements made in the past.

What will happen to existing and pending applications for mineral agreements?

Pendingapplications for mineral agreements will not be granted and approved by the DENR-MGB. These may, however, be converted into Exploration Permit applications to allow themto conduct initial exploratory work.

Why did the law impose only a 2% excise tax on mining?

The2% excise tax on mining, implemented through a revision of the National Internal Revenue Code, was meant to spur and attract mining investments in the country at a time when mineral prices were down and the industry was at a stand-still. The current rate needs to be reviewed to allow the government to maximize returns from mining, and legislation should explore the possibility of providing flexibility in the imposition of excise tax rates through a progressive tax system similar to what is implemented in other mining countries.

What is the impact of the new EO on current government mining revenues?

Currentrevenues from mining will be maintained since the EO allows existing mines and operations to continue. In fact, because of other revenue-raising measures in the EO and directives, mining revenues should increase despite the deferment on the grant of new agreements as provided for in the EO.

Is there already a draft bill/legislation on these revenue measures?

TheDOF has been crafting the proposed legislation to rationalize the revenue and benefit sharing-schemes and incentives given to mining companies. The DOF is also considering inputs from an IMF Technical Assistance Study and mission on mining taxes and fees in the Philippines. Once finished, the Administration plans to prioritize the passage of this legislative measure.

What measures were put in place to address the country’s economic or revenue- related concerns?

• Establishment of Mineral Reservations for strategic mineral reserves to be able to collect 5% additional royalties, or higher (Sec 5, EO)
• Opening of mining areas through competitive public bidding (Sec. 6, EO)
• Disposition of abandoned ores and valuable metals in mine wastes and mill tailings (Sec. 7, EO)
• Value-adding activities and development of downstream industries (Sec. 8, EO)
• Demand operational and financial reports from both large- and small-scale miners at all stages of the mining cycle (Directives to MICC)
• Conduct of verification at the national, regional and local levels of taxes and fees payable and monitoring of all entry and exit points of minerals in the country (Directives to MICC)
• Fast-track release and access of LGUs to their share from mining revenues (Directives to MICC)
• Updating of mineral commodity profile and database on new products, markets and available technologies (Directives to MICC)
• Conduct a study on existing mechanisms for benefit sharing and review of existing taxes, fees and incentives receive by mining companies (Directives to MICC)
• Study the terms and conditions of service contracts entered into by the Department of Energy (DOE) for energy resources for possible application for mining agreements

(Directives to MICC)

• Study the imposition of higher export fees for metallic and non-metallic minerals in the country (Directives to MICC)
• Consider tapping 3rd party international auditors to validate the volume and value of mineral exports from the Philippines (Directives to Good Governance Cluster)
• Increase mine wastes and tailings and occupation fees and impose processing fees for all mining applications (Directives to DENR)
• Provide benchmarks for the valuation of minerals based on prevailing international minerals market prices (Directives to DENR)
• Prepare and maintain revenue baseline data and properly account for all taxes and fees generated from mining (Directives to BIR)

What specific legislative measures will the government pursue in light of the EO?

Thefollowing steps will be studied and undertaken for inclusion in the legislative measures:

• Rationalization of revenue-sharing schemes and mechanisms and incentives given to mining companies
• Bigger LGU shares from mineral resource utilization and providing better mechanisms for the faster release of their share
• Stiffer penalties for mining-related offenses
• Possible inclusion of medium-scale mining among the categories of mining
• Stronger regulatory rules over traders and middlemen to improve mineral production monitoring and collection of taxes and fees from mining
• What measures were put in place to address the impact of mining on the environment?
• Stricter enforcement of environmental laws and rules, and holding violators accountable (EO and Directives to DENR)
• Identifying additional areas closed to mining
• Review of the performance of mining operations and cleansing of non-moving mining rights holders (Sec. 3, EO)
• Assess and improve small-scale mining conditions (i.e., establish minahang bayan, enforce compliance with environmental impact assessment requirements, limit mining to specific metallic minerals, prohibit the use of mercury) (Sec. 11, EO)
• Use of integrated maps and Programmatic Environmental Impact Assessment (Sec. 16 and 17, EO)
• Proper accounting of Environmental Protection and Enhancement Programs (EPEP) of mining companies (Directives to DENR)
• Use of geo hazard and multi-hazard maps and climate change forecasts in determining “go” and “no-go” areas (Directives to DENR)
• Explore use of mandatory and compulsory insurance coverage for mining affected areas and adoption of Comprehensive Environmental Response, Compensation and Liability Act of the USA (Directives to MICC)
• Resource accounting or full-cost benefit analysis (Directives to MICC)

What are the benefits of opening areas with known and verified mineral resources and reserves for mining through competitive bidding?

Thepublic bidding of the granting of mining rights and tenements over areas with known and verified mineral resources and reserves will allow the government to negotiate for better terms in mineral agreements and allow it and the public to maximize potential benefits from mining. In addition, public bidding will ensure transparency and allow the State to deal with legitimate and serious mining investors and developers.

The specific parameters for the public bidding will be provided for in the IRR, taking into consideration existing best practices in current government bidding procedures and the principles of transparency and accountability.

The old procedure was simply done on a first-come, first-served basis, in that whoever applies or files first for an application for a mineral agreement or mining tenement; then he or she will exclude all others from that area applied for. This procedure allowed speculators to flourish, giving authority to sit and do nothing with their applications to the detriment of those who seriously want to pursue mining operations, and of the

government for lost revenues and benefits for the people.

Are indigenous people’s rights vis–a-vis mining protected by the EO?

Yes.The EO reiterates the State policy on the recognition of IP rights (Whereas clause, EO) and the NCIP has drafted and issued its revised guidelines for the FPIC process. Close coordination with the NCIP will be undertaken to ensure its proper conduct and implementation for the benefit of all concerned stakeholders. In addition to this, the NCIP, DSWD and the DENR are directed to ensure that the social preparation for IPs to be affected by mining will be conducted (Directives to DENR, DSWD, and NCIP).

Complete cultural mapping to identify IP areas will also be undertaken to complete the ancestral domain delineation process.

Aside from tackling issues related to large-scale mining, does the EO address the concerns of small-scale mining?

Yes.Several measures were undertaken to address the issues concerning small-scale mining. These are:

• Reiteration of RA 7076 as the governing law in small-scale mining
• The constitution and operationalization of the P/CMRBs to ensure the proper management and regulation of small-scale mining operations
• The establishment of Minahang Bayan to provide specific and exclusive areas for small-scale mining to avoid overlaps and conflicts with other mining rights and tenements holders
• Small-scale mining of metallic minerals shall be limited to gold, silver and chromite since these are the most suitable for artisanal methods, which do not use equipment, machinery and explosives (the definition of small-scale mining per RA 7076 refers to mining activities which “do not use explosives or heavy mining equipment”)
• To help small-scale miners and to recognize them as a formal sector; training and capacity-building measures in the form of technical assistance will be conducted by concerned agencies.

How does the EO reconcile the roles of the national government and LGUs with regard to mining?

The National Government shall coordinate and cooperate with the LGUs in ensuring the proper implementation of mining related laws, rules and regulations, especially as regards small-scale mining

{xtypo_download}EO 79 and FAQ{/xtypo_download}