Mining issues

The new mining policy of the Aquino administration was envisioned to narrow the differences among the stakeholders. But in its earnest desire to address the needs of various interest groups, the administration is pleasing no one. Mining firms were hit by a freeze on the approval of new permits and the prospect of paying higher taxes, environmentalists were disappointed that existing mining contracts will be honored, and local government units are hurting from the provision that says local laws should be aligned with national laws on mining.

A key reform in Executive Order 79 is the increase in the government’s share of the mining income through an equitable revenue-sharing scheme. In fact, no new mining contracts will be approved until Congress has passed a law raising the royalty fees. Environment Secretary Ramon Paje says the government wants to more than double the royalty fees to 5 percent from 2 percent. He argues that the target rate is reasonable because other countries like Canada, Chile and Australia impose royalty fees ranging from 7 percent to 18 percent.

The money involved is significant. The taxes, fees and royalties paid by the mining industry in the first half of 2011 amounted to P4.62 billion, of which national government agencies got P2.98 billion in taxes and P1.18 billion in royalties and other fees. LGUs hosting mines, on the other hand, received P457.8 million. For the entire 2010, the taxes paid by the industry reached P13.37 billion.

But can the House of Representatives move on the EO’s taxation component with the same dispatch it showed in impeaching then Chief Justice Renato Corona? Will it not be impeded by powerful lobby groups? (The “sin taxes” bill, which is filed and refiled in Congress year after year, easily comes to mind.)

Another sticky issue was raised by the Joint Foreign Chambers of the Philippines, which counts as members nearly all foreign firms doing business here. It is concerned about Section 4 of the EO, which states that while the government will continue to issue exploration permits, it will detach such agreements from the grant of mineral extraction agreements. The group says the provision is “a deterrent to investment.” It warns that while the EO states that those with exploration permits have the first option to develop an area should a mine deposit be discovered, “no mining company can be expected to spend extremely large amounts of money on exploration without certainty [as to] the grant of a mining title.”

As we have said earlier, the EO’s restriction on the role of LGUs is problematic. In declaring the supremacy of national laws over local laws, the EO opens the mining industry to tedious and unproductive court litigation. Section 12 provides that local ordinances should be consistent with the Constitution and national laws, that LGUs should be confined to the imposition of “reasonable limitations” on mining activities in their jurisdiction, and that these should be consistent with national laws and regulations. But who determines “reasonable limitations”?

Bureau of Mines records show that half of the country’s 80 provinces have passed ordinances against large-scale mining. This early, Gov. Felipe Nava of Guimaras has indicated that the local government would stand by an ordinance banning mining on the island-province. Guimaras has a strong case because it is on the list of areas to be developed as tourism spots. It is also vying to be declared among the protected areas, which EO 79 excludes from the reach of mining firms. (These “no-go” zones will also raise a problem: How will the government deal with mining applications for areas that are not significantly high-value sites of conservation, tourism or agriculture?)

A bright spot we see is the provision that only one law—Republic Act 7076—will be followed for small-scale mining. The law says that all small-scale mining can be done only within the “Minahang Bayan.” This will limit the miners to one place and allow for the proper containment and treatment of wastes. Prior to this, LGUs could issue permits anywhere through Presidential Decree 1899, making small-scale mining extremely hard to regulate and leading to the pollution of waterways.

The Joint Foreign Chambers says the swift implementation of EO 79’s key components will help the Philippines become an attractive place to do business under the banner of responsible mining. The administration must speed up the formation of the multisectoral council that will oversee implementation. It will be a difficult balancing act for the planned council, which will have to find that desired middle ground.