Executive Order No. 462
ENABLING PRIVATE SECTOR PARTICIPATION IN THE EXPLORATION,
DEVELOPMENT, UTILIZATION AND COMMERCIALIZATION OF OCEAN, SOLAR AND WIND ENERGY
RESOURCES FOR POWER GENERATION AND
OTHER ENERGY USES
WHEREAS, Section 2 of Article 12
of the Constitution provides that “all land of the public domain, waters, minerals,
coal, petroleum and other mineral oils, all forces of potential energy,
fisheries, forest or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. With
the exception of agricultural lands, all other natural resources shall not be
alienated. The exploration, development
and utilization of natural resources shall under the full control and
supervision of the State. The State may
directly undertake such activities, or may enter into coproduction, joint
venture or production sharing agreements with Filipino citizens or corporations
or associations at least sixty per centum of whose capital is owned by such
citizens”;
WHEREAS,
Presidential
Decree No. 1068 issued on January 12, 1977 directed the “acceleration of
research, development and utilization of nonconventional energy resources” and
Republic Act 7638 of December 9,1992 mandated the
Department of Energy (DOE) to “formulate and
implement a program for the accelerated development of nonconventional energy
systems and the promotion and commercialization of its application”;
WHEREAS, ocean, solar and wind
(OSW) energy resources are forces of potential energy which are nonconventional,
indigenous renewable, environment-friendly and of such abundance that could
provide the Philippines self-sufficiency in energy and possibly surpluses for
export in the future despite high energy demand due to rapid economic growth;
WHEREAS, it is in the national
interest to accelerate the development and utilization of OSW energy resources
by enabling private sector participation.
NOW, THEREFORE, I FIDEL V. RAMOS,
President of the Republic of the
SECTION 1. Exploration,
Development and Utilization of OSW Energy Resource. – Subject to existing rights, the government,
extraction, harnessing, development and utilization of ocean, solar and wind (OSW)
energy resources preferably with the participation of the private sector under
a production-sharing contract awarded by the
Secretary
of the DOE, after due consultation with the host community/ies and local
government units concerned, through public bidding or negotiation. The production-sharing contractor must be
technically and financially capable of undertaking the operations required in
the contract.
SEC. 2. Scope
of Production-sharing Contracts. –
Production-sharing contracts as herein authorized shall be limited to lands of
the public domain and offshore waters within the Philippine territory,
contiguous zone and exclusive economic zone.
All lands or offshore waters covered by contracts granted under this
order shall be subject to public easement established or recognized by existing
laws.
SEC 3. OSW
Energy Projects in Private Domain. –
Energy generation of ore than one (1) megawatt from OSW resources in private
lands as well as the privately-held offshore shall be regulated by the
DOE through the existing accreditation system
for power plants. Generation projects of
one (1) megawatt or less shall be regulated by the local government unit/s
concerned in accordance with pertinent local energy plan/s, coordinated with
the national energy plan and approved by the
DOE.
SEC. 4. Exclusive
Privilege. – A production-sharing
contract under this Order shall bestow exclusive privilege to the contractor
for the exploration, development and utilization of the OSW energy resources in
the contract and during the term of the contract. Such privilege shall be transferable to
another qualified person only upon approval of the
Secretary of the DOE.
SEC. 5. Resource-use
Conflicts. – In case other natural
resources are present in the contract area, the multiple-use concept shall be
applied insofar as practicable subject to
RA 7586
otherwise known as National Integrated Protected Area System Law (NIPAS). If a natural resource-use conflict is not
resolved by multiple use, the first-come-first-serve principle shall prevail.
SEC. 6. OSW
Energy Resources in Government Reservations. – OSW energy resources in government
reservations, except in areas that have been established and specifically
delineated as protected areas under the procedures prescribed by the
NIPAS Law, shall be availed of only through the
production-sharing contract system under this Order.
SEC. 7. Qualification
of Contractor. – A contractor under
this order shall be a qualified natural or juridical person seeking to explore,
develop, utilize and harness OSW energy resources in the
SEC 8. Production-sharing
Contract Components. – A
production-sharing contract under this Order shall include a “Pre-Commercial
Contract” and a “Pre-Negotiated Commercial Contract”. The Pre-Commercial Contract shall involve
exploration, resource assessment, piloting, feasibility studies, environment
impact studies and all other studies prior to commercial production. The Pre-Negotiated Commercial Contract shall
provide in terms and conditions for the commercial phase of the project which
shall be negotiated at the same time as the Pre-Commercial Contract.
SEC. 9. Declaration
of Commerciality. – Upon
determination of the commercial feasibility of the project within or at the end
of the “Pre-Commercial Contract”, the contractor shall submit to the
Secretary of the DOE a written declaration
that the project is commercially feasible.
The Secretary, upon review of the facts supporting such declaration and
after due public consultation with the host community and local government
unit/s concerned, shall issue a “Letter of Confirmation” which shall
automatically bring into force the “Pre-Negotiated Commercial Contract”.
SEC. 10. Contract
Area. – For purposes of the
delineation of OSW energy contract areas under this Order, the Philippine
territory, its contiguous zone and its exclusive economic zone shall be divided
into meridional blocks, (one- half (1/2) minute of latitude and one- half (1/2)
minute of longitude each with an area of about eighty one (81) hectares. The minimum size of a contract area for
ocean, solar or wind or any combination there shall be one meridional block
(about 81 hectares) whether on land or offshore. The maximum area that can be awarded to a
qualified person shall be 100 blocks (about 8,100 hectares) for wind or solar
or their combination and 1,000 blocks (about 81,000 hectares) for ocean or a
combination of ocean and wind and/or solar, all over the
SEC. 11. Occupation
Fee. – For contract areas on land,
an occupation fee of fifty pesos (P 50.00) per hectare, or a fraction thereof,
shall be paid by the Contractor immediately upon award of the contract and
yearly thereafter at the date of award.
Such payment shall be made to the treasury of the Municipality or City
where the contract area is located. For
contract areas offshore, the occupation of fee of fifty pesos (P 50.00) per
hectare per year shall be paid by the contractor to the Treasurer of the Municipality
or City, as defined in the Local Government Code, the occupation fee of fifty
pesos (P 50.00) per hectare per year shall be paid by the contractor to the
DOE immediately upon issuance of said “Letter
of Confirmation”.
This fee shall be allocated to
the local government units in accordance with Section 292 of R.A. 7160,
otherwise known as the Local Government Code of 1991. The
Secretary
of the DOE is authorized to increase the fee when public interest so
requires.
SEC. 12. Relinquishment. – During the pre-commercial phase of the
contract, at least fifty percent (50%) of the Contract Area held shall be
relinquished at the end of every two years subject to the approval of the
Secretary of the DOE. The relinquished area shall be of a regular
shape consisting of contiguous meridional blocks. The contractor shall specify the first area
that will be retained for the commercial phase of the project in the
“declaration of commerciality”.
SEC. 13. Duration
of Contract. – The Pre-Commercial
Contract shall have a maximum period of five (5) years of solar and/or wind and
seven (7) years for ocean or in combination with solar and /or wind. The Commercial Contract, involving any of the
energy resource of their combination, shall have a maximum duration of
twenty-five (25) years, renewable one for the same number of years.
SEC. 14. Government
Share. – Considering the
prospectivity of generating profit from the operation of the contract, a
government share (GS) shall be determined through bidding or negotiation
between the
DOE and the contractor. The GS shall include a signature bonus and
production bonus. The signature bonus
shall be given to
DOE at the date of
signing of the Pre-Negotiated Commercial Contract upon the issuance of a “Letter
of confirmation” of the commercial feasibility of the project by the
Secretary of the DOE. The production bonus shall be paid to the
DOE at the end of each calendar year during
the commercial phrase of the project. To
protect the welfare of electricity consumers, the GS shall be limited to clues
that shall not result in electricity prices higher than the contracted selling
rates to electric utility in the area where the project is located.
SEC. 15. Allocation
of Government Share. – The
Government Share as referred in the preceding section shall be allocated in
accordance with section 290 and 292 of Republic Act No. 7160, otherwise known
as the Local Government Code of 1991.
SEC. 16. Incentives
for Production-sharing Contractor. –
The contractor shall be granted incentives and privileges that are allowed in
existing laws; and government will further assist, if necessary, pioneering
projects on OSW energy development and commercialization to make them viable.
SEC. 17. Termination
and Abandonment. – Termination and
abandonment procedures, primarily for the purpose of environmental
rehabilitation, shall be spelled out in the production-sharing contract. Commencing from the year of commercial
production, the contractor shall open a “trust account” jointly in the name of
contractor, the
DOE and the concerned
municipality/ies or city/ies wherein an amount equivalent at least one centavo
(P 0.01) per kwh of electricity sold shall be deposited in a commercial bank on
a quarterly basis to cover the cost of environmental assurance and
rehabilitation during termination and abandonment. The amount shall be determined by the
Secretary of the DOE in consultation
unit/based on environmental assurance requirement per project.
SEC. 18. Environmental
Impact Assessment. – The work
program for the precommercial phase of a production-sharing contract shall
include environmental impact assessment in accordance with P.D. 1586, otherwise
known as the “Philippine Environmental Impact Statement (EIS) System”, and its
implementing rules and regulations. The
environmental Compliance Certificate arising from such environmental impact
assessment shall be a supporting document to the “Declaration of
Commerciality”.
. 19. Implementing
Unit. – In accordance with Section 8
(d) of
R.A. 7638, the
Secretary
of the DOE shall create a service unit that will provide necessary
ancillary services for the implementation of this Order. Funds for operations of this unit shall be
defrayed from the appropriate fund of the Office of the President in 1997 and
1998. Thereafter, the acquired funds for
the operations of this unit may be included in the budget of the
DOE in the
General Appropriations Act.
SEC. 20. Implementing
Rules and Regulations. – The
Department of Energy, in coordination with
concerned government agencies shall formulate and issue the necessary
implementing rules and regulations within sixty (60) days after the effectivity
of this Order.
Sec. 21. Effectivity. – This Executive Order shall take effect fifteen (15) days after its publication in at least two (2) newspapers of general circulation.
Done in the City of
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