Philippine laws on natural resources are based on the Regalian Doctrine. Under this principle, the Constitution states:"All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State." It follows that the exploration, development and utilization of mineral resources fall under the supervision and control of the State.
The Constitution grants the State the option to directly undertake mining activities or to enter into the different modes of mining agreements with Filipinos or 60% Filipino-owned corporations. This provision is interpreted as giving preference to Filipinos in the grant of mineral rights, privileges and concessions. For large-scale mining, the Constitution grants the government the option to enter into an agreement for either financial or for technical assistance from a foreign corporation.
Under the Mining Act, all public and private lands are open to mining operations. It states:"all mineral resources in public or private lands, including timber or forestlands... shall be open to mineral agreements or financial or technical assistance agreement applications."
This provision has led to critics' contention that the law has virtually opened up the entire country to mining operations. The law declares areas covered by existing mining claims or that are deemed ecologically crucial as closed to mining operations. The latter includes old growth forests, watershed forest reserves, mangrove and mossy forests, national parks, bird sanctuaries and marine reserves, among others. But upon the consent of the government or other concerned parties, areas barred from mining operations can still be mined. These areas include military reservations, areas covered by small-scale mining and ancestral lands.
The Mining Act allowed three major kinds of mining rights that would govern access to mineral resources and for which an interested investor may apply. These are the Exploration Permit (EP), the mineral agreement and the Financial or Technical Assistance Agreement (FTAA).
An Exploration Permit grants the right to explore a specified area for a period of two years. If a mineral deposit is found and has potential commercial viability, the permit holder has the right to enter into any type of mineral agreement or financial or technical agreement with the government.
A mineral agreement grants the contractor the right to conduct mining operations within a specified contract area for a period of 25 years, renewable for another 25 years. There are three modes of mineral agreements: the Mineral Production Sharing Agreement (MPSA), the co-productin agreement and the joint venture agreement.
The three modes differ in the extent to which the government is involved in the mining operation. In an MPSA, the government merely grants the right to the mineral resources whereas the contractor provides the financing, technology, management and personnel for the implementation of the agreement. In a co-production agreement, the government contributes other resources in addition to the rights. A joint venture agreement requires the government and the contractor to organize a joint venture company in which both parties have equity shares. In all three cases, the mining contractor should be either a Filipino citizen or a corporation having at least 60% Filipino equity.
For large-scale mining operations, the government may opt to enter into a Financial or Technical Assistance Agreement (FTAA) with either a Filipino or foreign corporation. The Act defines the FTAA as a contract involving either financial or technical assistance for the large-scale exploration, development and utilization of mineral resources. As this provides foreign mining companies to have full equity and control of mining projects throughout the country, it has become the focus of opposition against the law. For a minimum investment of US $50 million (or its equivalent in pesos for a Filipino corporation), the mining firm is granted 81,000 hectares of land for mineral exploitation for a period fo 25 years per contract, renewable for a maximum of another 25 years.
Indigenous communities and non-governmental organizations (NGOs) have questioned the legality of the FTAA provision. According to them, the Act and its Implementing Rules and Regulations allow foreign companies not only both financial and technical assistance but also total control of mining operations.
They contend that while the Constitution allows the government to enter into financial or technical assistance agreements with foreign-owned corporations, it is an agreement for mere assistance, which is either techincial or financial. They assert that the Constitution does not allow foreign corporations to actually control, manage or engange in full mining operations.
Aside from the generous contract terms above, the law also provides auxiliary rights that will ensure that the mining rights are exercised unhampered. These auxiliary rights include the right to enter private lands, the right to build necessary infrastructure on private lands as well as water and timber rights within the mining area as necessitated by the mining operations.
The law also provides a host of financial incentives that will guarantee returned investments and profitability to the mining contractor. These include a 100% repatriation of investments in dollars, a 100% remittance of earnings in dollars, freedom from expropriation, and double acceleration of depreciation costs, among others.
The collection of the government's share in the financial or technical assistance agreement, consisting of corporate income tax, excise tax, and other duties and fees, shall commence only after the mining operator has fully recovered its pre-operating expenses. When the mining contractor starts commercial production, a revenue sharing scheme begins wherein the government will receive 60% of the net profit from the operation while the contractor receives 40%. However, all corporate taxes, excise taxes, duties and fees, payable by the corporation will be counted against the government's 60% share.
As of December 1996, 100 FTAA applications and 1454 MPSA applications have been filed before the Department of Environment and Natural Resources - Mines and Geosciences Bureau (DENR-MGB). Of the FTAA applications, 99 were filed by foreign-owned mining corporations and only one was filed by Filipino mining company Benguet Corp. which is nonetheless partly foreign-owned.
It is also interesting to note that of these FTAA applications, 52 were filed before the approval of the Mining Act, while 14 were submitted before the Implementing Rules and Regulations of the Act were finalized on August 15, 1995. The total area of the application covers approximately 12.2 million hectares of the land area of the Philippines. If all FTAA applications and MPSAs were approved, 40.65% of the country's total land area will be covered by mining claims.
The DENR-MGB, however, quickly points out that not all applications will be approved and that the grant of 81,000 hectares for mineral exploration is subject to a progressive reduction or relinquishment where the mining contractor returns to the government areas that have low mineral potential. The DENR-MGB stresses that the law allows a contractor a maximum of only 5,000 hectares for actual mining or commercial production that will commence after the sixth year of the contract period.
NGOs and indigenous communities point out that while relinquishment does significantly reduce the land area open to mining activities, 5,000 hectares is still a huge land area, especially in a country where landlessness remains a perennial problem.
Indigenous peoples and environmental groups also raise concern over the potential environmental effects of more large-scale mining activities should these be allowed to commence. With the 1996 Marcopper mining disaster in Marinduque and the ravages of open pit mining in Benguet as examples of the potential impact, these groups believe that mining operations of the FTAA scale could wreak havoc on the country's environment.
Another key feature of the Mining Act pertains to the issue of ancestral lands of indigenous communities. The Act deems ancestral land as closed to mining operations without the prior consent of the indigenous cultural community concerned. The Act defines prior consent as referring to "prior, informed consent" obtained, as far as practicable, in accordance with the customary laws of the indigenous peoples concerned. The process of arriving at an informed consent should be "free from fraud, external influence and manipulation".
The DENR-MGB says that this requirement of prior informed consent strengthens government's cognizance of indigenous peoples' rights to their land. Indigenous peoples and their advocates, however, are critical. While they concede that the provision gives indigenous peoples the wherewithal to approve or reject a mining application in their communities, they also ask whether, in conditions of deprivation and in the absence of genuine development alternatives, they are being given any option at all.
As a law that concerns the rights of indigenous cultural communities, the Indigenous Peoples Rights Act (IPRA) touches significantly on the country's fundamental laws and principles governing natural resource ownership and use. To that extent, IPRA impinges on the Mining Act of 1995.
Enacted into law on October 29, 1997, IPRA (Republic Act 8371) implements the Constitutional provisions regarding the rights of indigenous cultural communities. As stated in the Constitution, the State "recognizes and promotes the rights of indigenous cultural communities within the framework of national unity and development". Furthermore, the State, "subject to the provisions of this Constitution and national development policies and programs, shall protect the rights of indigenous cultural communities to their ancestral lands to ensure their economic, social and cultural well-being."
In line with these and other Constitutional provisions, IPRA spells out the right of indigenous peoples to their ancestral domains, their right to self-governance and empowerment, their social and human rights, and their right to cultural integrity. IPRA also allocates for the administrative bodies, mechanisms and funds to implement its provisions.
The passage of the law immediately drew vehement opposition from the mining companies, and at best, mixed reactions from NGOs and indigenous communities. Although many NGOs had been involved in the formulation and passage of the law, the final version fell short of their expectations and of government's rhetoric about tis supposed commitment to "recognize, protect and promote", indigenous peoples' rights. While some have called for the rejection of IPRA as a whole, others have held the view that the law, despite its deficiencies, poses opportunities to further the indigenous peoples' struggles. But whatever the indigenous peopels' and NGOs' stances vis-a-vis IPRA, the mere passage of such a law represents a milestone in the long struggle for the recognition of indigenous peoples' rights.
Among the more controversial provisions of IPRA are its definition of ancestral domains (Sec. 3(a)) and Existing Property Rights Regimes (Sec. 56).
Section 3(a) provides an expanded definition of the concept of ancestral domains, which goes beyond those set forth in earlier laws on indigenous peoples rights.
Subject to Existing Property Rights Regimes (Sec. 56), Section 3(a) includes within the concept of ancestral domains not only areas such as ancestral lands, forests, worship areas, hunting and burial grounds, but also pastures, residential and agricultural lands, bodies of water and mineral and other resources. Including mineral resources within the scope of ancestral domain is significant as it qualifies the Regalian Doctrine, embodied in the Constitution, which puts all mineral and natural resources under the control and disposition of the State.
But Section 56, which states:"property rights within the ancestral domains already existing and/or vested upon effectivity of this Act, shall be recognized and respected," excludes lands that are privately owned from the scope fo ancestral domains. This has the effect of practically negating the progressive definition of ancestral domains contained in Section 3. Mining companies have taken this provision to further their interests, interpreting "vested rights" as including mining concessions. Thus, under such interpretation, mining concessions already existing prior to the effectivity of IPRA are excluded from the scope of ancestral domains. MGOs and indigenous communities ahve taken a strong stand against such interpretation. To include mining concessions within the purview of vested rights could open the floodgates to exclusion from the scope of ancestral domains sizable lands that are now under timber concessions and permits to operate commercial tree farms.
But even without including mining concessions within the concept of vested rights, Section 56, as it is, already excludes from the ancestral domains vast tracts of lands all over the country. These include the mineral lands of large mining companies in the Cordillera and teh fertile lands owned by agri-business companies in Mindanao.
Mining companies were quick to register their opposition against IPRA. In position papers and statements, they claimed that the law violates the Regalian Doctrine and certain provisions of the Mining Act. They said the enactment of IPRA is sending confusing signals to foreign mining companies wanting to invest in the Philippines, and had the effect of dampening enthusiasm for investment opportunities created under the liberalized mining law.
But all the debates on the pros and cons of IPRA have been rendered futile, as of the moment. In September 1998, or barely a year after its enactment, a petition was filed before the Supreme Court questioning the legality of the law. Acting with undue haste, the Court reach a decision in record time ordering the temporary deferment of the implementation of the law. It took only a few days to strike down what indigenous peoples have taken years of struggle to gain.
The People's Small Scale Mining Act or Republic Act 7076 stands in stark contrast with the Mining Act of 1995. Passed into law on June 27, 1991 and its implementing rules finalized in July 1992, it was enacted with very little public consultation. While the Mining Act liberalized the mining sector to attract capital investments into the industry, the general framework of the People's Small-Scale Mining Act seemed to stifle the development of small-scale mining, regulate and control the industry, and deprive small-scale miners, particularly indigenous communities, of an age-old economic activity.
The act defines small-scale mining as mining that relies heavily on manual labor using simple implements and methods that does not use explosives or heavy mining equipment. It also makes a distinctino between small-scale miners and traditional small-scale miners. Traditional small-scale miners are defined as:"Filipino citizens who have a distinctive socio-economic cultural tradition with a subsistence base focused on small-scale mining," and who live in stable sedentary communities, and employ physical separation methods for the extraction of minerals or metals from the ore.
Small-scale mining takes place in over 30 provinces in the Philippines and involves as many as 200,000 people. Small-scale miners account for a significant volume of the total gold production in the Philippines. In 1994, they produced almost half, or 46% of the 27,059 kilograms of gold produced in the country.
The People's Small-Scale Mining Act stresses its regulatory intent through the following major provisions:
That the law favors large-scale mining operations can be gleaned from the provision on the contract term of two years alloted small-scale miners, which contrasts with the 25-year contract allowed Filipino and multinational corporations under the Mining Act. Small-scale miners are allowed to mine only within a maximum 20-hectare contract area compared to the 81,000 hectares granted to an FTAA holder under the Mining Act.
NGOs and small-scale miners' organizations contend that the initial two-year contract period is barely enough time for small-scale miners to develop their mine and recover their investments. They also express apprehension over the scenario that if small-scale miners were to discover mineral lands of high-grade ore, these could be transferred to multinational corporations a the end of the initial two-year lease.
The small-scale miners are required to process their ore in a centralized processing mill and sell their gold to a centralized buying station under the supervision of the Central Bank. This imposes strict and burdensome government taxation at many stages of the mining process from ore processing to marketing. These requirements differ markedly from the generous incentives, including possible tax-free holidays, offered through the FTAA schemes for large mining corporations.
Of significant concern, however, especially for traditional small-scale miners, is the requirement that they, in applying for a mining area, recognize prior or existing mining rights or claims over the area and acquire the mining claimant's consent. NGOs and indigenous peoples' organizations see a subtle prejudicial intent within this law, one that can be used to drive away indigenous peoples from their ancestral lands. By seeking approval, traditional small-scale miners acknowledge that the land and its resources are not theirs in the first place to control. Recognition of the law would imply that the indigenous peoples are surrendering their legal and moral claims over their ancestral lands.
* excerpted from: "Setting the Scene: An Overview of the Mining Industry and Regulatory Climate in the Philippines" by Ismael Cruz. From "Minding Mining! Lessons from the Philippines, by the Philippine International Forum, February 1999.
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