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1995 MINING ACT PEOPLES MINING BILL

SHERWIN DE VERA Research & Advocacy Officer, ICRED Convenor, Save the Abra River Movement

ASSESSING THE

AND THE

OUTLINE
Profile of the Philippine Mineral Industry

Orientation & Features of the Mining Sector


Debunking the Myth of Development & Responsible Mining under RA 7942 Towards a New Philippine Mining Policy Updates on HB 4315 The Consolidated Mining Bill Our Call

Profile of the Philippine Mineral Industry

GOLD

COPPER

NICKEL

THIRD

FOURTH

FIFTH

The estimated levels of metallic and non-metallic mineral reserves stood at 7 billion metric tons and 50 billion metric tons, respectively. The country's refractory chromite resource in Zambales is one of the largest in the world. (National Statistic Coordinating Board)

From 545 approved mining agreements in 2009, we now have 785 approved mining projects, as of January 2012. Around 1,042,531 hectares from the total land area of the country is now covered by mining permits.

Mining Operations 30 Metallic Mines (2011) 3 copper + gold & silver 1 copper + gold, silver & zinc 5 gold mines 2 metallurgical chromite 18 nickel mine 1 magnetite mine 2, 358 Non-metallic mines 1820 sand & gravel 15 cement 523 others Processing 1 nickel processing plant 1 copper processing plant Gold, nickel, copper & chromite compose 96% of mineral production in the country.

Orientation & Features of the Mining Sector

STRUCTURAL ADJUSTMENT PROGRAMS OF INTERNATIONAL FUNDING INSTITUTIONS

In the 1990s leading IFIs (IMF, WB, ADB) took issue on the supposed restrictive laws & regulations governing foreign investments in key sectors & industries. They recommended & exerted their influence through financial loans to create a friendlier business climate for foreign investments & rejuvenate mining in the Philippines.
During this period, the WB was very aggressive & explicit in recommending reforms towards liberalizing the mining sector in Africa, Latin America, & the Carribean consistent with the framework of RA 7942.

STRUCTURAL ADJUSTMENT PROGRAMS OF INTERNATIONAL FUNDING INSTITUTIONS

The following are some of the recommendations of the Asian Development Bank (ADB):

The enactment of a new mining code; The integration of the Omnibus Investment Code and the Foreign Investment Act, which is deemed essential to establishing a single statute covering all major provisions governing the rights and obligations of foreign investors in the Philippines

The World Bank (WB) proposed the following actions to meet their investment standards:
Reducing risk and uncertainty for potential investors; Ensuring easy access to exploration permits and mining concessions; Providing additional guarantees in investment agreements to protect the investor from unwarranted government interference;

The RAMOS ADMINISTRATION kicked-off for the full liberalization of major industries in the Philippines including mining. On 6 March 1995 RA 7942 or the Philippine Mining act of 1995 was passed into law taking into account almost all the recommendations of ADB and the World Bank. Its primary objective was to revitalized the Philippine mining industry and make it among the key contributors to the countrys economic growth.

Republic Act No. 7942 (Philippine Mining Act of 1995) AN ACT INSTITUTING A NEW SYSTEM OF MINERAL RESOURCES EXPLORATION, DEVELOPMENT, UTILIZATION AND CONSERVATION Exploration Permit (EP) 2 years/renewable up to 8 years Grants exclusive right to explore and eventually enter into Mineral Agreement or Financial or Technical Assistance Agreement

Mineral Processing & Sharing Agreement (MA) 25 years & renewable for 25 years -Three (3) modes: Mineral Production Sharing; Co-Production and Joint Venture; Grants exclusive rights to explore, develop and utilize minerals Financial or Technical Assistance Agreement (FTAA) 25 years/renewable for 25 years. It involves large-scale mining operations with minimum committed investment of $50 Million for infrastructure and development . Needs approval by the President of the Phils.

KEY FEATURES OF RA 7942 (THE PHILIPPINE MINING ACT OF 1995)

100% ownership of foreign company and providing equal rights and opportunity to exploit the mineral resources with Filipino citizens, and the following incentives:
Tax holidays (for a maximum of 5 years) & incentives such as accelerated depreciation of fixed assets & exception from real property taxes on pollution control. investment guarantees, repatriation of capital, freedom of expropriation, remittance of earnings and interest on foreign loans, freedom from requisition of properties and the confidentiality of information with regards to endeavors and transactions. Privileges free use of timer & water, easement rights; military protection & govt infrastructure support.

In 2004, the Supreme Court (SC) declared its provision, the Financial & Technical Assistance Agreement (FTAA) unconstitutional. But, controversially and suddenly, the SC reversed its decision after the lobbying of the Executive Department and business groups.
Furthermore, former Pres. Gloria Arroyo harmonized existing laws & regulations through the Mineral Action Plan to conform with the requests of mining corporation. This shifted the state policy from tolerance to active promotion. Creation of the Committee on Mining Security & Investments Defense force under the National Mineral Council which provided the legal framework for the AFP & PNP to actively participate in the promotion of mining investments.

Aquino had signaled that further liberalizing the countrys mining industry to generate more revenues was a top economic priority. PNoys economic target is to double foreign investment in mining ($2.8B) in 2011. He also vowed to guide the mining industry by protecting the investments of mining companies. Continued support for the Investment Defense Force (IDF)

Last October 2011, he ordered further recruitment of paramilitary forces and their deployment in mining areas.
Exempted Mining Companies from total log ban

NEW EXECUTIVE ORDER ON MINING

draft was set to be completed by the end of February titled Institutionalizing and implementing reforms in the Philippine mining sector, providing policies and guidelines therefor, and for other purposes

To maximize revenue from the mining sector, the government wants to: Declare more mineral reservations
would increase the government take by 5% + 2% excise tax = 7%; it would raise the govt revenue from P400M to P6B per year.

Increased regulations & control Auction of mineral rights

intends to put greater pressure to small-scale miners Highest bidder system to maximize the share for the government.

Debunking the Myth of Development & Responsible Mining under RA 7942

GOVT & CORPORATION CLAIMS ON THE 1995 MINING ACT (RA 7942)
A comprehensive policy and legislation that provides both comprehensive mine closure and post-mining sustainable development Will make the industry contribute a multiplier effect of six times which means at a potential valueadded of P300 billion annually, mining can add an incremental economic activity of P1.8 Trillion or 36% of the GDP

FOOLS GOLD: Insignificant economic gain from the industry

Mining is the 3rd lowest value-added among 14 major sectors but has the highest profit margin.

FOOLS GOLD: Insignificant economic gain from the industry


Ave. Contribution to GDP (20002010): 1.105 % Ave. Share to Total Employment (2000-2010): 0.438 % Ave. Contribution to Exports Metallic (2000-2010): 3.33 % Ave. Share of Mining Investments to Total Investments: 2.50% Mining has the highest poverty incidence of any sector in the country 48.7%. The only sector where poverty incidence increased between 1988-2009.

Depriving people of access to land and other natural resources


Section 18 of RA 7942 says, all mineral resources in public or private lands, including timber or forestlands shall be opened to mining operations. Access and control to as much as 81,000 hectares onshore and 324,000 hectares offshore are accorded to each of these mining corporations. Such right is given along with timber, water, easement, ingress and egress rights and a host of fiscal incentives.

Perpetuates export-orientation and import-dependence

Dependent to foreign capital and technology


Stuck at low valued-added extractive stage: 1 copper smelter & 1nickel processing plant Export oriented: US$ 2.173B or 6% of total exports (2011) Japan, Australia, Canada, China Unequal trade: US$ 2.5B exports vs US$3.3B imports (2008)

Widespread environmental destruction Marcopper (1996) Marinduque Philex Mining Spill (19971998) Zamboanga del Norte Maricallum (2001) Negros Occidental Dizon Silver & Copper Mines (2002) Zambales TVI Mining Corp. (2004) Zamboanga del Norte Lafayette Mining (2005) Rapu-Rapu, Albay Lepanto Consolidated Mining Corporation Benguet Mining Corporations Philex Mining Corporation

Blatant disrespect of human rights & culture of impunity

36 recorded cases of antimining activist killings since 2001, 7 in 2011 Harassment to discourage public opposition (SLAPP on CEC-Phils, red-baiting, & vilification of activists) Militarization of communities and advocates through SCAAs, continuation of IDFs, approved by Aquino this 2011

THE PMA OF 1995 IS A FAILURE & THREAT TO THE PEOPLE & ENVIRONMENT policy is misguided because mining has not solved poverty despite several decades of operation in host municipalities private financial benefits from mining in fact remains to be inferior to those from alternative investments the financial contribution of mining to the economy ranges from almost zero to nil to negative compared to the social & environmental cost PRIVATIZE BENEFITS & SOCIALIZE COSTS

TOWARDS A NEW PHILIPPINE MINING POLICY (HB 4315)

What is HB 4315 or the Peoples Mining Bill?

An Act Re-Orienting the Philippine Mining Industry, Ensuring the Highest Industry Development Standards, and for Other Purposes Reorient the current policy on ownership, management & governance of metallic and nonmetallic resources Based on the 2005 Peoples Mining Policy developed through nationwide consultation with grassroots peoples organization. It covers onshore & offshore, large & small scale mining operations and their conservation, exploration, development, utilization, processing & transport.

Sponsored by BM Rep. Teddy Casio with other progressive partylists. Filed on march 2, 2011

What is the framework and principle behind the bill?

Motive: build local industries, create jobs, develop local communities. Domestic oriented, stateled, Filipino owned & controlled. Based on national industrialization strategy

Economically viable, environmentally sound, rights based, balanced with food security and agriculture modernization

Mining Act of 1995 vs Peoples Mining Bill


SCOPE & BASIC PRINCIPLES

Mining Act of 1995

HB 4315 (People's Mining Bill)

State owns all minerals in public and private State owns all minerals, coal, natural gas lands in Philippine territory. and petroleum resources in its national territory. Appropriate utilization, sound management, and benefits of minerals is exclusive to the Filipino people and shall not be alienated State responsible for promoting the rational exploration, development, utilization, and conservation of minerals through the combined efforts of government and the private sector. Framework is to enhance national growth, revitalize the mining industry through fiscal reforms, additional benefits and incentives for foreign investors. State leads mining industry development according to a National Industrialization Program and Mining Plan

To be developed within the framework of 1.) national industrialization through the nationalization of the industry towards self-sufficiency, and 2.) achieving genuine agrarian reform, the modernization of its agricultural base and rural development.

Mining Act of 1995 vs Peoples Mining Bill


OWNERSHIP & GOVERNANCE

Mining Act of 1995


Emphasis on Presidential prerogative. Decisions over mining permits highly concentrated on the decision of the President (upon recommendation of the DENR Secretary). Little opportunity to decide is given to LGUs and other stakeholders via public consultation.

HB 4315 (People's Mining Bill)


Based on strategic and local plans and consultations. Industry development is based on a National Industrialization Program and Mining Plan and decisionmaking on the local level devolved to MultiSectoral Mineral Councils (MSMCs) which include representatives from affected LGUs, mining-affected communities and other stakeholders. All areas are closed to mining unless declared open by the MSMCs, through a two-thirds vote. MGB is a scientific research institution under the DENR, to serve primarily as a central repository of information on mining operations. It is responsible for resource database, inventory, and prioritization, mining exploration on behalf of the State, and public Information.

All areas open to mining unless declared closed by the Government Role of gov't agencies. DENR has the authority to enter into mineral agreements.MGB in charge of the administration, disposition of minerals, researches and exploration surveys. MGB Director recommends to the DENR Secretary the granting of mining agreements to qualified persons.

Mining Act of 1995 vs Peoples Mining Bill


TAXES, FEES, & BENEFIT SHARING

Mining Act of 1995

HB 4315 (People's Mining Bill)

Limited government share. Government, community shares increased: Government share is limited to National government share equivalent to 10% of excise taxes of 2% required by gross revenues in addition to 2% excise tax law. No mandate on royalty fee or LGU share from net revenues for MSMC, Disaster benefit sharing. Risk Management, ICCs and IPs. Indigenous cultural communities royalty, of at least ten percent of the gross revenues. Scientific Research and Development Fund Legal Services Fund for communities and LGUs Limited taxes and fees, including semi-annual mine wastes and occupation fees. Mining permits enjoy 6 years income tax exemption, 10 years export tax exemption, and import tax exemption. Taxes and fees increased to include, but not limited to, Mine Wastes and Tailings fees, contractors income tax, customs, duties and fees on imported capital equipment, Value-added tax on imported goods and services, withholding tax on interest payments to foreign loans and on dividends to foreign stockholders, documentary stamps tax, capital gains tax, excise tax on minerals, local business tax, real property tax, community tax, occupation fees, registration, accreditation and permit fees, and water usage fees.

Taxes, Fees, and BenefitAct of 1995 vs Peoples Mining Bill Mining Sharing
TAXES, FEES, & BENEFIT SHARING

Mining Act of 1995

HB 4315 (People's Mining Bill)

Generous fiscal and non-fiscal Incentives shall be given for the use of incentives. Through the Executive Order pollution control or mitigation devices. No. 226 (Omnibus Investments Code of 1987), contractors are given incentives for Pollution Control Devices, Income Tax-Carry Forward of Losses, Income Tax-Accelerated Depreciation, and Investment Guarantees. Investment guarantees. The contractor is entitled to (a) Repatriation of investments, (b) Remittance of earnings, (c) Foreign loans and contracts,(d) Freedom from expropriation, (e) Requisition of investment and (f) Confidentiality All large-scale mining contractors are required to deposit their capital investment and profits in Philippine banks or financial institutions. Contractors with foreign financial assistance are required to fully disclose all profits, and allowed to repatriate profits up to fifty percent (50 %) of the total posted at the end of every fiscal year. Full repatriation of profits shall be allowed one year after mining ends and the area is rehabilitated.

HYPOTHETICAL MINE: SOME COMPUTATIONS


TAXES, FEES, & BENEFIT SHARING

90%

Government Take (NPV10)

80% 70% 60% 50% 40% 30% 20%


Consolidated Bill FTAA MPSA

10%
0% 60% 80% 100% 120% 140% 160%

Operating Costs (% of baseline)

Mineral Agreements Mining Act of 1995 vs Peoples Mining Bill


MINERAL AGREEMENTS

EXPLORATION PERMITS
Mining Act of 1995
Duration of operations: Two years, maximum of eight years Maximum area: 32,000 ha. onshore, 81,000 ha. offshore Economic priveleges: 100% repatriation of capital and profits, Six years income tax exemption, 10 years export tax exemption, Import tax exemption, employment of foreign nationals allowed, right to transfer or sell mining permit, confidentiality rights Political rights over timber, water, easement, entry into private lands/concession areas

HB 4315 (People's Mining Bill)


None The MGB has the exclusive right and responsibility to conduct mining exploration throughout the country.

Mineral Agreements Mineral Agreements Act of 1995 vs Peoples Mining Bill Mining
MINERAL AGREEMENTS

FINANCIAL &TECHNICAL ASSISTANCE AGREEMENT (FTAA)


Mining Act of 1995
Duration of operations: 25 years, renewable up to 50 years Maximum area: 81,000 ha. onshore, 324,000 ha. offshore Capitalization: 100% foreign ($50 million minumum investment) Economic priveleges and political rights: Same as EP

HB 4315 (People's Mining Bill)


None FTAA is deleted.

Mineral Agreements Mineral Agreements Act of 1995 vs Peoples Mining Bill Mining
MINERAL AGREEMENTS

MINERAL PRODUCTION & SHARING AGREEMENT (MPSA)


Mining Act of 1995
Duration of operations: 25 years, renewable up to 50 years Maximum area: 16,200 ha. onshore, 40,500 ha. offshore Capitalization: 60% Filipino, 40% foreign Economic priveleges: Same as EP Political rights: Same as EP

HB 4315 (People's Mining Bill)


Duration of operations: 15 years or less Maximum area: 500 ha.; exact size to be set by the MSMC Capitalization: 60% Filipino, 40% foreign

Mining Act of 1995 vs Peoples Mining Bill


ENTL PROTECTION, CONSERVATION & REHAB

Mining Act of 1995


Lenient and inadequate. Provisions on Safety and Environmental Protection do not stipuate stringent financial, technical, and procedural guidelines to ensure ecological conservation, mitigation, and rehabilitation.

HB 4315 (People's Mining Bill)

It recognizes the precautionary principle and the polluter pays principle. Thus, it requires contractors to supply the financial requirements for environmental and disaster protection and technological support for rehabilitation activities, including: It is based only on the submission of an Environmental insurance contract environmental protection and enhancement Calamity & Human Rights Protection Fund program in the contractor's work plan and Performance Bond compliance with Environmental Impact Mine Rehabilitation Fund Assessment (EIA), which does not adequately address the complexity of mine It requires permit holders to conduct operations. progressive rehabilitation and pollution mitigation activities, prioritize the use of water for domestic, municipal, and agricultural purposes and mitigate the incidence of acid mine drainage through specific recommendations and provisions.

Mining Act of 1995 vs Peoples Mining Bill


CANCELLATION, REVOCATION &TERMINATION

Mining Act of 1995


Grounds are only limited to administrative violations, such as late or non-filing of registration, violation of permit terms, and nonpayment of taxes and fees. The law does recognize human rights violations of corporations as a ground for cancellation.

HB 4315 (People's Mining Bill)


Grounds include 1.) violations of any provision of the Act, 2.) non-payment of taxes; 3.) bribery, use of force, intimidation, threat, coercion of public officials and communities; 4.) acts creating or contributing to conflicts; and the like, and 5.) failure to initiate mining operations within two years.

Grounds for immediate cancellation are 1.) human rights violations by the contractor or any of its agents; 2.) use of paramilitary forces to protect mining operations, and 3.) violations of environmental provisions, which shall also require compensation and rehabilitation. Permit holders found guilty are perpetually banned from participating directly or indirectly in mining operations in the Philippines. Government officials guilty of administrative violations shall be removed from office and perpetually disqualified from holding any government post.

SMALL SCALE MINING


small-scale mining operations shall be supported and regulated by the state.

The state will encourage the formation of cooperatives among small-scale miners and provide financial and technical support to develop the labor-intensive and upgrade the backward technologies into a more efficient and less environmentally destructive mining process.
Whenever smallscale mining are stopped, alternative and sustainable livelihood shall be provided to the small-scale miners. Ban to large scale mining in areas covered by small-scale miners as defined by law unless with prior consent of the small-scale miners, in which case a royalty payment upon the utilization of minerals shall be agreed upon by the parties

TRANSITORY & FINAL PROVISIONS Moratorium on mining Cancellation of all permits, licenses, agreements Livelihood support and job placements for dislocated workers Presidential Decree 463, Presidential Decree 512, Republic Act 7942, & other related mining laws are repealed P100B appropriation

UPDATES ON HB 4315

THE DRAFT CONSOLIDATED MINING BILL

OTHER MINING BILLS House Bill 206 - Alternative Mining Bill


by Reps. Tanada & Padilla

House Bill 3763 - Minerals Management Bill


By Reps. BAG-AO, BELLO, BAGUILAT, RODRIGUEZ, RUFUS RODRIGUEZ, MAXIMO JR., PADILLA, GOLEZ, AGLIPAY, VALENCIA, LAGMAN, GARIN, JANETTE, ALVAREZ, ANTONIO, ABAD, UMALI, ZUBIRI, CORTUNA, CATAMCO, SAN LUIS, FERNANDEZ, CELESTE, GARCIA-ALBANO, PANGANDAMAN, HATAMAN-SALLIMAN, VERGARA, SARMIENTO, BATOCABE, RIVERA, ROMARATE, FLORES, SACDALAN, UNGAB, PING-AY

THE DRAFT CONSOLIDATED MINING BILL

THE CONSOLIDATED BILL House Bill 206 Alternative Mining Bill + House Bill 3763 Minerals Management Bill + House Bill 4315 Peoples Mining Bill

OUR CALL

QUESTIONS?