Minefield

Events of the last two weeks in the mining sector indicate just how much this has turned into a minefield for both the industry and the government. The Department of Environment and Natural Resources announced on Feb. 2 the closure of 23 mines and the suspension of five others. It followed this up with an announcement on Feb. 14 of the closure of another 75 mines currently in development or under exploration. The explanation was that the mines either had failed an audit or were located in watershed areas.

By way of background, there has been a mining moratorium since 2012 when Executive Order 79 was issued creating the Mining Industry Coordinating Council (MICC). In short, no new mining permits have been granted since then. Among other things, EO 79 stipulated that the moratorium would remain in place until “go-vs-no-go” mining zones were identified (a task since completed), until a new revenue-sharing scheme between the government and mining companies could be established by law (not completed), and a policy regime for small-scale mining had been established (partially completed). EO 79 remains in place.

With all the noise surrounding the closures and suspension, it might be useful to deconstruct the controversy into three separate aspects.

The first aspect: Was due process followed? The DENR holds that the authority to close or suspend mines lies in the agency. No one argues about that authority but the question remains: Was due process followed? To begin with, one must remember that the DENR itself approved the mining permits and was responsible for monitoring the mines and making sure they were performing in accordance with the law. One must also note that mining concessions are basically contracts between the government and individual mining companies. If a contract were broken, what are the terms governing that contract? And who conducted the audits, and were findings given to companies to review and reply to? Finally, what processes are available to companies and the government to address the issues? If processes were somehow not completely followed, what recourse do companies have and what risks does the government face? Can it be taken to court over failure to respect the terms of its own contract with its partners?

The second aspect: Is there a transition plan for affected communities and stakeholders, assuming the orders have followed due process and the mine operations are closed or suspended? There doesn’t seem to be an agreement between the DENR and other government agencies with respect to the impact of the closure and suspension orders. The Departments of Finance and of Labor and Employment, for instance, talk about potential loss of jobs and impact on municipal finance, while the DENR talks about mining operations’ effects on the health of farmers and fishers and on the environment. All three are probably right, but unless they come into agreement and get on the same page, it’s not likely that a joint transition plan can quickly be formulated, much less implemented.

The third aspect: Does the DENR wish to pursue a major policy change by, for instance, banning all mining in watershed areas, or even banning mining altogether? As earlier stated, a mining moratorium has been in place since 2012, so the recent closure and suspension announcement is clearly referring to mines approved before that period. In some sense, the policy pendulum has already begun swinging against the industry. On the other hand, it was the DENR that approved the mines in the first place, including those in watersheds. If those were not allowed, how did those approvals even take place? Or were they actually allowed by law and the DENR is basically changing its mind now? If so, then it had better refer back to the first aspect (the due process issue). If it wants to pursue this as a policy now, then it had better pursue that prospectively rather than arbitrarily shut mines down without due process.

Either way, everybody had better tread carefully around this minefield.

Guillermo M. Luz (gm.luz@competitive. org.ph) is the private-sector cochair of the National Competitiveness Council.